Indian banks, which have strengthened their balance sheets, will trigger mergers and acquisitions to conform to stringent Basel-II norms coming into effect in 2007.In a report titled Indian Banks: Improved Performance in Recent Years, Fitch said profitability was under pressure due to falling trading income in a rising interest rate environment."The proposed Basel-II guidelines will result in capital raising becoming a priority issue. Coupled with a growing need for scale, it may well trigger some sort of consolidation in the industry," the report said.Saying that the Indian banking system was fragemented with a median asset size of $5 billion and that most of the banks were relatively small by global standards, Fitch said: "Future mergers among healthy government banks are expected to create a few national champions that would lead the system's on-going migration to increased health."
