Finance Minister Arun Jaitley on Monday said India needs fewer and mega banks to achieve economies of scale in the sector.
After the amalgamation of five associates and Bharatiya Mahila Bank with SBI in 2017, the government earlier this year approved the merger of Dena Bank and Vijaya Bank with Bank of Baroda.
"With the experience in the past really has been of SBI merger, now it is second one which is taking place," Jaitley said after the customary post-budget address to the RBI board.
"India needs fewer and mega banks which are strong because in every sense, from borrowing rates to optimum utilisation, the economies of scale as far as banking sector is concerned are of great help," he said.
The Union Cabinet last month approved the merger of the three banks to create the country's third-largest lender after SBI and ICICI Bank.
The amalgamation, the first-ever three-way consolidation of banks in India, would be effective from April 1, 2019.
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After the merger, the number of public sector banks will come down to 18.
In September 2018, the Alternative Mechanism, headed by Jaitley, gave in-principle approval for the merger of the three banks to create a global-sized lender.