The article analyses the recently proposed legislation (in India) to exclude the jurisdiction of the competition regulator and bring bank mergers under the exclusive purview of the central bank. The article takes a look at bank merger regulation and its evolution in the US and in the EU, and argues that India should take lessons from the approach in various jurisdictions to implement a mechanism of concurrent review by the central bank and the competition regulator to ensure an independent review from a competition perspective. Various issues relating to the banking sector and bank merger regulation are examined. The efforts of the fledging Competition Commission of India and its scrutiny of the banking sector are discussed. While acknowledging the special nature of the banking sector, the possible adverse impact of the move on India's position as a favoured global investment destination is also discussed. A study of the global approach is undertaken by analysing the trends in the US and in the EU where bank mergers have been increasingly brought under the scrutiny of the competition regulators (instead of leaving them under the exclusive jurisdiction of the banking sector regulators) on the basis that the banking sector must adhere to the general rules of competition legislation and may not be afforded any special treatment. It is argued that the competition regulator is best suited to review mergers from a competition perspective and its exclusion from the review of bank mergers would result in India moving in the opposite direction from the global approach in recent years.
World Competition