Assocham calls for consolidation of banks

Industry body Assocham today called for consolidation in the Indian banking sector without any delay to enhance global competitiveness, despite dithering of RBI on the issues.

According to study the size of Indian banks in terms of their assets is very small to make optimal use of their capacities for raising funds at globally competitive rates.

The balance sheets of top 10 Indian banks suggest the greater scope of consolidation to reap the benefits of large sized globally competitive Indian banks, it said.

The banks are not able to compete globally in terms of fund mobilisation, credit disbursal, investment and rendering of financial services as they are hampered by the fragmented nature of the banking industry.

"Therefore, consolidation to certain degree is highly warranted to ensure substantial increase in assets base of Indian banking system, besides enhancing their global competitiveness," Assocham President Swati Piramal said.

Dispelling apprehension about the likelihood of a big bank failure in India, the study states that the size of Indian banks is relatively very small as the combined assets of top ten banks constitute less than 60 per cent of the GDP.

Unlike, the banking system of European economies, where even after the global financial turmoil assets of only top five banks has grown to four times of GDP.