ROLE OF CCI IN BANKING MERGERS WITH SPECIAL REFERENCE TO BANKING LAW AMENDMENT

INTRODUCTION:Mergers and acquisitions in the banking sector is a common phenomenon across the world. The primary objective behind this move is to attain growth at the strategic level in terms of size and customer base. This, in turn, increases the credit-creation capacity of the merged bank tremendously. Small banks fearing aggressive acquisition by a large bank sometimes enter into a merger to increase their market share and protect themselves from the possible acquisition.Banks also prefer mergers and acquisitions to reap the benefits of economies of scale through reduction of costs and maximization of both economic and non-economic benefits. This is a vertical type of merger because all banks are in the same line of business of collecting and mobilizing funds. In some instances, other financial institutions prefer merging with a bank in case they provide a similar type of banking service.Another important factor is the elimination of competition between the banks. This way considerable amount of funds earlier used for sustaining competition can be channelized to grow the banking business. Sometimes, a bank with a large bad debt portfolio and poor revenue will merge itself with another bank to seek support for survival. However, such types of mergers are accompanied with retrenchment and a drastic change in the organizational structure.

Consolidating the business also makes the bank robust enough to sustain in the every-changing business environment. They find it easier to adapt themselves quickly and grow in the domestic and international financial markets.

MERGERS AND AQUISITIONS:Merger is a combination of two or more companies into one company. In India, mergers are called as amalgamations, in legal terms. The acquiring company, (also referred to as the amalgamated company or the merged company) acquires the assets and liabilities of the target company (or amalgamating company). Typically, shareholders of the amalgamating company get shares of the amalgamated company in exchange for their existing shares in the target company. Merger may involve absorption or consolidation.

-> Merger and amalgamation: the term merger or amalgamation refers to a combination of two or more corporate entity into a single entity. Forms of merger that can happena) absorption- one bank acquires the other.b) consolidation- two or more banks combine to former a new entity. In India the legal term for merger is amalgamation.

Other ways of classifying merger is upon the basis of what type of corporate combine. It can be of following types-

1) Vertical merger[footnoteRef:2]: This is the merger of the corporate engaged in various stages of production in an industry. A vertical merger (entities with different product profiles) may help in optimal achievement of profit efficiency. Consolidation through vertical merger would facilitate convergence of commercial banking, insurance and investment banking. E.g. : a mobile producing company merge with the company which provides them parts of mobile and software. [2: http://law.jrank.org/pages/8543/Mergers-Acquisitions-Types-Mergers.html]

2) Horizontal merger- This is the merger of the corporate engaged in the same kind of business.E.g.: Merger of bank with another bank.

3) Conglomerate merger[footnoteRef:3]- A conglomerate merger arises when two or more firms in different markets producing unrelated goods join together to form a single firm. An example of conglomerate merger is that between an athletic shoe company and a soft drink company. The firms are not competitors producing similar products (which would make it a horizontal merger) nor do they have an input-output relation (which would make it a vertical merger) [3: http://www.wisegeek.com/what-is-a-conglomerate-merger.htm]

4) -> Acquisition[footnoteRef:4]: This may be defined as an act of acquiring effective control by one corporate over the assets or management of the other corporate without any combination of both of them. [4: www.investorwords.com/80/acquisition.html]

Case of oracle major software firm has agreed to acquire a majority stake in Indian bankingsoftware company I-flex Solutions.It can be characterized in terms of the following:a) The corporate remain independent.b) They have a separate legal entity.

-> Take over:[footnoteRef:5] Under the monopolies and restrictive trade practices act, lake over means acquisition of not less than 25% of voting powers in a corporate. [5: www.investorwords.com/4868/takeover.html]

REASONS FOR MERGER:1) Merger of weak banks- Practice of merger of weak banks with strong banks was going on in order to provide stability to weak banks but Narsimhan committee opposed this practice. Mergers can diversify risk management.2) Increase in market competition- Innovation of new financial products and consolidation of regional financial system are the reasons for merger.[footnoteRef:6] [6: http://law.jrank.org/pages/8543/Mergers-Acquisitions-Types-Mergers.html]

3) Markets developed and became more competitive and because of this market share of all individual firm reduced so mergers and acquisition started.4) Capability of generating economies of scale when firms are merged.5) Transfer of skill takes place between two organisation takes place which helps them to improve and become more competitive.6) Globalisation of economy impacted bank mergers.7) New services and products- Introduction of e- banking and some financial instruments / derivatives.8) Technology- Removal of entry barrier opened the gate for new banks with high technology and old banks cant compete with them so they decide to merge.[footnoteRef:7] [7: http://www.learnmergers.com]

9) Positive synergies- When two firms merge their sole motive are to create a positive effect which is higher than the combined effect of two individual firms working alone. Two aspects of it are cost synergy and revenue synergy.Cost Synergy is the savings in operating costs expected after two companies that complement each other's strengths join. Revenue Synergy is refers to the opportunity of a combined corporate entity to generate more revenue than its two predecessors stand-alone companies would be able to generate

BENEFITS OF MERGER TO INDIAN BANKSAfter clearly understanding the motives and rationale for merger, we can identify following benefits of mergers to the all participants.[footnoteRef:8] [8: ]

Sick banks survived after merger. Enhanced branch network geographically. Larger customer base (rural reach). Increased market share. Attainment of infrastructure.BANKING REGULATION ACT, 1949Under Banking Regulation Act, there is presently no provision for obtaining approval of the Reserve Bank of India for any acquisition or merger of any financial business by any banking institution. In other words, if a banking institution desires to acquire nonbanking finance company there is no requirement of approval of the Reserve Bank of India. Further, in case of a merger of an all India financial institution with own subsidiary bank, there was no express requirement of obtaining the approval of Reserve Bank of India for such merger, under the provisions of the Banking Regulation Act or the Reserve Bank of India Act. Such approval of the Reserve Bank of India is required only in the context of relaxation of regulatory norms to be complied with by a bank[footnoteRef:9]. [9: www.indialawjournal.com/volume1/.../article_by_vikram_malik.html]

However, for a regulator, it is a matter of concern to ensure that such acquisitions or mergers do not adversely affect the concerned banking institutions or the depositors of such banking institutions.Reserve Banks Review ProcessReserve bank of India has laid down guidelines for the process of merger proposal, determination of swap ratios, disclosures, the stages at which boards will get involved in the merger process and norms of buying and selling of shares by the promoters before and during the process of merger Reserve bank of India (RBI) in its capacity of the primary regulator and supervisor of the banking systems has information on the present functioning of all the banks in India, the RBI is the best suited to undertake the merger review process.While undertaking the merger review process, RBI will need to examine the proposal for the merger from a prudential perspective to gauge the impact on the stability and the financial well being of the merger applicants and on the financial systems[footnoteRef:10]. In addition to the assessment of the proposed merger on the competitiveness and stability of the financial systems, RBI will also need to examine the implications on regional development, impact on society etc. as a result of merger since banks in India also have to fulfill various social obligations. The RBI will need to examine the reasonableness of financial projection, including business plan and earning assumptions as well as the effect of the proposed merger on the merged entitys capital position. [10: http://www.business-standard.com/india/news/rbi-unwraps-guidelines-for-co-op-bank-mergers/201380/]

RBI would thus be expected to ensure that they constantly check the vulnerability of banks, as they are constantly exposed to risks through borrowings. RBI also has to ensure that, as the banks source money for lending by pooling short-term demand deposits (which they invest in long-term loans), they fund only viable projects for which there would be return, given that the money loaned out would be belonging to various creditors. In addition, the bank has to constantly check for a possible mismatch between the maturity of the banks assets and liabilities, which could make the banks prone to a constant threat of bank runs. This results in interventions and directions having implications on competition. In addition, unlike other firms which can survive without direct contacts with competitors, banks heavily depend on each other by lending to each other through the inter-bank lending markets. Banks face daily liquidity fluctuations, giving rise to surpluses and deficits, for which deficits have to be cushioned by borrowings from other banks with surpluses. This demonstrates the banks need for rival banks for survival, a situation not usually expected under competition principles, which could also give rise to interventions by the RBI calling for such strategic alliances, thereby seen to be undermining competition principles. In addition, unlike other firms which can survive without direct contacts with competitors, banks heavily depend on each other by lending to each other through the inter-bank lending markets. Banks face daily liquidity fluctuations, giving rise to surpluses and deficits, for which deficits have to be cushioned by borrowings from other banks with surpluses. This demonstrates the banks need for rival banks for survival, a situation not usually expected under competition principles, which could also give rise to interventions by the RBI calling for such strategic alliances, thereby seen to be undermining competition principles.

Finally RBI will have to consider potential changes to risk profile and the capacity of the merger applicants risk management systems, particularly the extent to which the level of risk would change as a result of the proposed merger and the merged entitys ability to measure, monitor and manage those risks. Broadly the information that will need to be examined by RBI while evaluating a proposal for merger would include:The objective to be achieved by the merger.What impact could the merger have on the financial markets?What impact could be the creations of mega bank have on monetary policy, the management of interest rates? What threat to the Indian economy would be posed by the difficulties experienced by a mega bank in its international activities?The impact that the merger might have on the overall structure of the industry.The possible costs and benefits to customer and to small and medium size businesses, including the impact on bank branches the availability of financing price, quality and the availability of services.The timing and the socioeconomic impact of any branch closures resulting from the merger.The manner in which the proposal will contribute to the international competitiveness of the financial services sector.The manner in which the proposal would indirectly affect employment and the quality of jobs in the sector, with a distinction made between transitional and permanent effects.The manner in which the proposal would increase the ability of the banks to develop and adopt new technologies. Remedial steps that the merger applicants would be willing to take to mitigate the adverse effects identified to arise from the merger.

Regulated Activities for Banks with Overlaps with CompetitionWhilst there could be other channels that can be used by the central bank to influence outcomes of the banking sector (e.g., bailouts or directives on mergers), there are generally some specific issues that are covered by specific statutory and administrative regulatory provisions, which include the following: Restrictions on branching and new entry; Restrictions on pricing (interest rate controls and other controls on prices or fees); Line-of-business restrictions and regulations on ownership linkages among financial institutions; Restrictions on the portfolio of assets that banks can hold (such as requirements to hold certain types of securities or requirements and/or not to hold other securities, including requirements not to hold the control of non financial companies); Capital-adequacy requirements, normally enforced through forced or encouraged mergers; Requirements to direct credit to favoured sectors or enterprises (in the form of either formal rules or informal government pressure), resulting in some needy firms failing to access credit; Special rules concerning mergers (not always subject to a competition standard) or failing banks (e.g., liquidation, winding up, insolvency, composition or analogous proceedings in the banking sector); Other rules affecting cooperation within the banking sector (e.g., with respect to payment systems).

COMPETITION COMMISSION OF INDIAS ROLE IN MERGERS AND ACQUISITIONThe Competition Act, which received Presidential assent on January 13, 2003, established the Competition Commission of India (the CCI) as the new statutory authority to inquire into alleged contraventions of the legislation. The Competition Act is a dramatic shift from the previous competition-related legislation, the Monopolies and Restrictive Trade Practices Act, which had been in place long before India undertook its significant market reforms and, as a result, was increasingly irrelevant, ineffective, and overly bureaucratic.[footnoteRef:11] The Merger Control provisions contained in Sections 5 and 6 of the amended Competition Act are perhaps the most noteworthy elements of the new law, insofar as mergers were not specifically addressed under the erstwhile MRTP Act. Section 5 defines combinations and lays out the relevant thresholds for regulation. Combinations, in terms of the meaning given to them in the Act, include mergers, amalgamations, acquisitions and acquisitions of Control.[footnoteRef:12]Section 6 authorizes the CCI to investigate combinations above certain size thresholds, which includes mergers, amalgamations, and acquisitions of shares, assets, voting rights, or control. Section 6(1) states that combinations that cause, or are likely to cause, an appreciable adverse effect on competition are prohibited.[footnoteRef:13]Section 6(2), as amended in 2007, provides for mandatory pre-merger notification within 30 days of either approval of the proposal for a combination or execution of the agreement for an acquisition.[footnoteRef:14] As in the case of agreements, mergers are typically classified into horizontal and vertical mergers. In addition, mergers between enterprises operating in different markets are called conglomerate mergers.[footnoteRef:15] [11: http://www.blakes.com/english/view_disc.asp?ID=1801] [12: Section 5 of the Competition Act, 2002] [13: Section 6(1) of the Competition Act, 2002] [14: Section 6(2) of the Competition Act, 2002] [15: Gina M. Kilian, Bank Mergers and The Department of Justices Horizontal Merger Guidelines: A Critique and Proposal, 69 Notre Dame L. Rev. 857.]

Mergers are a legitimate means by which firms can grow and are generally as much part of the natural process of industrial evolution and restructuring as new entry, growth and exit. From the point of view of competition policy, it is horizontal mergers that are generally the focus of attention. As in the case of horizontal agreements, such mergers have a potential for reducing competition. In rare cases, where an enterprise in a dominant position makes a vertical merger with another firm in an adjacent market to further entrench its position of dominance, the merger may provide cause for concern. A merger leads to a bad outcome only if it creates a dominant enterprise that subsequently abuses its dominance. To some extent, the issue is analogous to that of agreements among enterprises and also overlaps with the issue of dominance and its abuse, discussed earlier. Viewed in this way, there is probably no need to have a separate law on mergers. The reason that such a provision exists in most laws is to pre-empt the potential abuse of dominance where it is probable, as subsequent unbundling can be both difficult and socially costly.

Thus, the general principle, in keeping with the overall goal, is that mergers should be challenged only if they reduce or harm competition and adversely affect welfare. The Act has listed the following factors to be taken into account for the purpose of determining whether the combination would have the effect of or be likely to have an appreciable adverse effect on competition.[footnoteRef:16] [16: Section 20(4) of the Competition Act, 2002]

The actual and potential level of competition through imports in the market; The extent of barriers to entry to the market; The level of combination in the market; The degree of countervailing power in the market; The likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins; The extent of effective competition likely to sustain in a market; The extent to which substitutes are available or are likely to be available in the market; The market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination; The likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market; The nature and extent of vertical integration in the market; The possibility of a failing business; The nature and extent of innovation; Relative advantage, by way of the contribution to the economic development, by any combination having or likely to have appreciable adverse effect on competition; Whether the benefits of the combination outweigh the adverse impact of the combination, if any.On finding a combination to have appreciable adverse effect on competition, the CCI is empowered under Section 31 to direct the combination not to take effect or propose appropriate modification to the combination.Thus, the main thrust behind the merger regulations as laid down in the Competition Act, 2002 is that the entity which is created after the merger should not have an appreciable adverse effect on competition. The CCIs main duty is to investigate whether the proposed combination will have effect or is likely to have an appreciable adverse effect on competition post-merger based on the criteria that have been laid down in the Act itself. The CCI is not mandated to look at other factors which may be at work in the merger, since it is not the duty of the CCI to do so. It is only required to ensure that combinations do not create a situation which may either lead to cartelization or potential abuse of dominant position by the entity which either remains or is newly created after the combination takes place. The viability of the merger is not within the mandate of the CCI, but instead it is the sectoral regulators such as TRAT, IRDA and RBI itself, along with the relevant Ministry who have been given the duty to look at the various aspects pertaining to viability of combinations, keeping in mind the several factors which play a role in that particular sector.Moreover, the primary objectives of the Competition Act, 2002 should also be kept in mind while analyzing the application of the Act. Competition Act, 2002 is passed keeping in view of the economic development of the country with following objective[footnoteRef:17]: [17: Preamble to the Competition Act, 2002]

1) To prevent practices having adverse effect on competition,2) To promote and sustain competition in markets,3) To protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets.Thus, promotion of competition, ensuring freedom of trade of the participants in the market and protection of consumer interests are the core principles which the CCI will always keep in mind while implementing the Competition Act, 2002.

COMPARITIVE STUDY OF RBI AND CCIS DISTINCTIVE ROLESince 1961 till date, under the provisions of the Banking Regulation Act, 1949, there have been as many as 77 bank amalgamations in the Indian banking system, of which 46 amalgamations took place before nationalisation of banks in 1969 while remaining 31 occurred in the post nationalisation era. Of the 31 mergers, in 25 cases, the private sector banks were merged with a public sector bank while in the remaining six cases both the banks were private sector banks.[footnoteRef:18] [18: http://finance.indiamart.com/investment_in_india/banking_in_india.html]

Report of the Committee on Banking Sector Reforms (the Second Narasimham Committee - 1998) had suggested, inter alia, mergers among strong banks, both in the public and private sectors and even with financial institutions and NBFCs.[footnoteRef:19] Indian banking sector is no stranger to the phenomenon of mergers and acquisition across the banks. Since the onset of reforms in 1990, there have been 22 bank amalgamations. It would be observed that prior to 1999, the amalgamations of banks were primarily triggered by the weak financials of the bank being merged, whereas in the post-1999 period, there have also been mergers between healthy banks driven by the business and commercial considerations. [19: http://www.ibef.org/industry/Banking.aspx]

The procedure for voluntary amalgamation of two banking companies is laid down under Section 44-A of the Banking Regulation Act, 1949. After the two banking companies have passed the necessary resolution proposing the amalgamation of one bank with another bank, in their general meetings, by a majority in number representing two-thirds in value of the shareholding of each of the two banking companies, such resolution containing the scheme of amalgamation is submitted to the Reserve Bank for its sanction. If the scheme is sanctioned by the Reserve Bank, by an order in writing, it becomes binding not only on the banking companies concerned, but also on all their shareholders.[footnoteRef:20] [20: Section 44-A of the Banking Regulations Act, 1949.]

Based on the recommendations of the Working Group to evolve the guidelines for voluntary merger between banking companies RBI had issued guidelines in May 2005 laying down various requirements for the process of such mergers including determination of the swap ratio, disclosures, the stages at which Boards will get involved in the merger process, etc.[footnoteRef:21] [21: Guidelines for Mergers/Amalgamations of Private Sector Banks, RBI/2004-05/462 Ref.DBOD.No.PSBS.BC. 89/16.13.100/2004-05, passed on May 11, 2005.]

While amalgamations are normally decided on business considerations (such as the need for increasing the market share, synergies in the operations of businesses, acquisition of a business unit or segment, etc.), the policy objective of the Reserve Bank is to ensure that considerations like sound rationale for the amalgamation, the systemic benefits and the advantage accruing to the residual entity are evaluated in detail. While sanctioning the scheme of amalgamation, the Reserve Bank takes into account the financial health of the two banking companies to ensure, inter alia, that after the amalgamation, the new entity will emerge as a much stronger bank.If we take a look at the banking regulations, we will never find the word cartel, dominance, or agreements in their legislations. Now if that is the case, it becomes obvious that asking the RBI to deal with competition issues using banking regulations is a non-starter. Thus there is no question that CCI should check abuse of dominance and cartelisation. However, the major concern of the RBI has been with regards to the bank mergers. The RBI has urged the Ministry of Finance that the RBI alone should have sole jurisdiction over the bank mergers and it should be outside the purview of the Competition Authorities, as the RBI has the special knowledge required to regulate the banking sector. The guidelines of the RBI specify the prudential regulations with respect to bank mergers. They do not look at the issues which the CCI looks at. As mentioned above, CCI only checks whether a combination will likely result in dominance or likely facilitate cartelisation. They will not go beyond this to check on prudential regulation, which they do not have the mandate nor competence to do. RBI on the other hand will only check whether the banks will remain sound and whether public money will remain safe after a combination. They will not go further and assess whether a dominant position will be created or whether cartelisation is likely, which is what CCI does.A distinction should be made between prudential regulation of banks by RBI and competition regulation of the whole economy, including financial sector, by CCI. Prudential regulation is largely centred on laying and enforcing rules that limit risk-taking of banks, ensuring safety of depositors funds and stability of the financial sector. Thus regulation of M&As by the RBI would be determined by such benchmarks. Competition regulation of M&As in the banking sector on the other hand is a different matter. This is aimed at ensuring that banks compete among themselves in fighting for customers by offering the best terms, lower interest rates on loans and higher interest rates on deposits and securities. Merger regulation by CCI would be therefore intended to ensure that such activities are not motivated by the desire to collude and make excessive profits at the expense of customers or to squeeze other players out of the market through abusive practices. While CCI does not have either the expertise or the remit on prudential regulation, RBI does not have the expertise or remit to regulate anticompetitive behaviour.[footnoteRef:22] [22: Pradeep Mehta, CCI has a Role to Play in Bank Mergers, http://www.cuts-ccier.org/ArticlesJan10-CCI has a role to play in bank mergers.htm.]

Competition policy and prudential regulation, to the extent that both seek to prohibit undesirable behaviour, are mutually compatible. In particular, as long as both prudential and competition authorities confine themselves to blocking undesired (rather than forcing or requiring) mergers, banks will have no difficulty abiding by both agencies merger decisions.As regards certain mergers, prudential regulation and competition policy can be complementary. A prominent example is mergers creating "too big to fail" banks, i.e. banks that are so large that market participants assume the government would take whatever steps might be necessary to preserve their solvency in a crisis.[footnoteRef:23] Such banks might be inclined to take what regulators regard as excessive risks. Banks seen by consumers as too big to fail could also give rise to competitive distortions since they may have an artificial advantage in raising funds, especially in markets where deposit insurance is inadequate.[footnoteRef:24] [23: OECD Policy Roundtable on Mergers in Financial Services, 2000] [24: Supra. note 48]

There is a limited potential for conflict between prudential and competition policy goals when it comes to mergers designed to shore up a failing or weakened bank. Even in such cases, however, it will normally be possible to avoid competition problems by choosing the right partner, or by structuring the merger so as to minimise its effects on local market concentration. In any case, conflict between prudential and competition policy goals can be reduced by close co-operation, including prior consultation between the pertinent agencies.

CHAPTER 10 -ANALYSIS Various Industrial and financial sectors are seeking to get exemption from CCI to look into their M&As. Section-60 of CCI act overrides all such legislation. Banking regulation (amendment) is one such law. CCI needs to object such laws through MCA. CCI cannot give up its role in M &As as once a dominant position is acquired by any entity, it will be a marathon task with huge legal impediments to restrict that entity in their role in anti competitive area. RBIs role as a regulator is to ensure safety of funds of depositors and monitor the role of banks in economic growth. CCIs role in a way is opposed to this as it looks at checking the profiteering motive of banks in charging unreasonable interest or giving lower returns to depositors etc. Both are distinctive and important.

Section 45 of the banking regulation act requires that RBI , restructure or amalgamate any number of weak banks with a stronger bank, if it finds that the failing weaker bank will have some impact on the economic development.But, the same banking regulation Act (should the new proposed amendment be carried out) requires that only the RBI (CCI is excluded) is authorized to look into any merger taking within the banking sector. This is a contradictory situation, as it gives RBI the ultimate power to both initiate a merger and also gives it the authority to look into it, and determine its legality and correctness.

ANALYSIS OF THE BANKING LAWS (AMENDMENT) ACT, 2012The Banking Regulation Act, 1949 has been in force for more than six decades. It empowers the Reserve Bank of India (RBI) to regulate and supervise the Indian banking sector. The amendment to the bill seeks to strengthen the RBIs regulatory powers and strengthen the Indian banking sector. The Banking Laws (Amendment) Bill, 2012 was cleared by both the Houses of the Indian Parliament in December 2012 and awaits the Presidents assent to become the Banking Laws (Amendment) Act, 2012. The Bill aims to address the capital raising issues in banks, strengthen the regulatory powers of the banking regulator, the Reserve Bank of India (RBI) and pave the way for issuance of new banking licences. Unlike other sectors, mergers and acquisitions (M&As) in the banking space may have to seek clearance from both fair market watchdogthe Competition Commission of India (CCI) and sectoral regulatorthe Reserve Bank of India. The earlier impression was that only involuntary mergers and acquisitions, the ones which are directed by the RBI, will come to the central bank along with CCI. However, now even voluntary deals will have to be cleared by both CCI and RBI.All mergers and acquisitions may now come under both the watchdogs. where CCI will see competition part of such deals, the RBI will see prudential aspects. For M&A activities, they (banks) will have to seek Reserve Bank approval from prudential point of view. RBI is the sectoral regulator so the health of banks is the concern of the RBI, health of banks is not CCIs concern, CCIs concern is their behaviour in the market and the consumer in the market.Earlier, Banking Laws (Amendment) Bill, 2011 had proposed that mergers and acquisition in the banking sector would be exempted from the purview of CCI. The RBI felt that it has the required expertise and competence to deal with bank mergers and subjecting such mergers to the scrutiny of the Competition Commission of India (CCI) would only result in more delays in processing of such requests. The RBI also felt that having another authority with a mandate in the banking sector would go against the spirit of the RBI Act, which grants the RBI the power to act as the central authority in all banking issues. While it was acknowledged that the RBI has a limited role to play in abuse of dominance cases and anticompetitive agreements cases, the government appears to have bought into the RBI idea. As a result, when merger provisions of the Competition Act were notified in March 2011, CCI was exempted from playing a role in mergers in the banking sector, as it was felt the RBI would be best suited to do the task.

CONCLUSIONBanking sector is one of the fastest growing areas in the developing economies like India.M&A is discussed as one of the most useful tool for growth, which has evoked the interest of researchers and scholars. Indian economy has witnessed fast pace of growth post liberalization era and banking is one of them. M&A in banking sector has provided evidences that it is the useful tool for survival of weak banks by merging into larger bank. It is found that small and local banks face difficulty in bearing the impact of global economy therefore, they need support and it is one of the reasons for merger. Some private banks used mergers as a strategic tool for expanding their horizons. M&As in bank are governed by both the RBI and CCI. Banking Amendment bill, 2012 also includes that Competition Commission of India will approve M&A (Mergers and Acquisitions) in banks except in the case of banks that are under trouble. In such cases, the RBI will have the final authority. Where RBI regulates that bank should be sound at the time of merger and after the merger. Competition regulation of M&As in the banking sector is aimed at ensuring that banks compete among themselves in fighting for customers by offering the best terms, lower interest rates on loans and higher interest rates on deposits and securities. Merger regulation by CCI would be therefore intended to ensure that such activities are not motivated by the desire to collude and make excessive profits at the expense of customers or to squeeze other players out of the market through abusive practices.

BIBLIOGRPHY1. S.N. Maheshwari & S.K. Maheshwari, Banking Law and Practice, 13thed, 20102. M.L.Tannan, revised by C.R.Datta & S.K.Kataria, Tannan's BANKING - Law & Practice in India, 23rd edition, reprint 20123. K.C.Shekhar & Lekshmy Shekhar, Banking - Theory and Practice, 20th edition, reprint 20114. M.N.Gopinath, Banking Principles and Operations, 4th edition, 2013Articles: Madhav kanoria, Application of Competition Law in the Banking Sector A Global Perspective, Jagrati kumar, Roles And Responsibilities Of CCI In Bank Mergers -A Legal Perspective1