Union Finance Minister P Chidambaram on Saturday said as India is on its way to become the world's third largest economy, it would need world size banks.
Chidambaram, while addressing at the Bancon-2012 meet here, said, "Finding new business models will inevitably lead to some consolidation."
"We must create at least two or three world size banks. China has done it," he said.
Chidambaram said some consolidation in banking space is ´inevitable´.
"If India wants to be ... and it will be the third largest economy in the world ... we must also have one or two world size banks and some consolidation is inevitable," he said.
Chidambaram said that earlier too attempt has been made to consolidate banks, but was strongly opposed by trade unions and small banks.
"We should not fear consolidation. I know there is pride and identity, but ultimately some consolidation would have to take place in the banking system in this country," he said.
He said the need of local banks will be there though some consolidation will take place among top banks.
"I regret that the idea of the local area bank which was started in 1996 stopped after first three licences were given. I think there is place for a local area bank for serving people of the region, local area, drawing strength from those people and serving those people," the Finance Minister said.