August 26, 2009

The country’s banking system needs consolidation to produce bigger, stronger players as its current size is not fit to meet the funding needs of a globalising Indian industry, the chairman of State Bank of India (SBI) said on Tuesday.SBI chairman OP Bhatt said India needs at least four banks of the size of SBI, and two banks that will have global scale. SBI, India’s biggest bank, currently ranks 64th among global banks, whereas China has four banks among the world’s top 20 banks.

The lack of global scale for Indian banks came into sharp focus during the recent financial crisis which saw several international banks reneging on their funding commitments to Indian companies, but local banks could not step into the breach because of balance sheet limitations.