Finance Minister Pranab Mukherjee today said bank managements should come forward with proposals for mergers to facilitate consolidation in the banking sector.
"The initiatives for consolidation in the banking sector have to come from the management of banks themselves," he told a meeting of the heads of state-run banks and financial institutions.
As regards the role of the government in the merger of banks, the Minister said, "The government would only play a supportive role as a common shareholder."
The process of consolidation of banks, Mukherjee added, "may be necessary to improve the state of competitiveness of Indian banks globally and also to reduce the risk to financial stability".
Replying to questions from media on the issue of consolidation of public sector banks, Finance Secretary Ashok Chawla said, "There is scope for consolidation of public sector banks... The initiatives must be from the bank managements."
The government, Chawla added, "will be happy to facilitate" merger of public sector banks.
Besides State Bank of India (SBI) and its six associate banks, there are 20 nationalised banks in the country. Large nationalised banks include Punjab National Bank, Canara Bank, Bank of Baroda and Bank of India.