The need for mega banks of international size from Indian soil cannot be denied. We definitely need mega banks to drive our international trade so that we have a respectable portion of the world trade.The other arguments put forth are: There is the need to achieve size in business volume and financial strength for survival in the era of globalization.

The domestic banking sector displays a high degree of fragmentation with the market share of the top five banks in India being 41.5% as against 75% in China. A fragmented banking sector is the antithesis of a profitable banking sector and consolidation would help achieve, among other things, economies of scale and evenness of geographical reach. Further, in the wake of compliance with the Basel II norms, capital management has become a pivotal issue for the banks. Banks need to provide substantial capital to take care of the new requirements under Basel II.

A in Banks, Issues and Challenges, international banks, domestic banking, financial strength, business volume, top five banks, domestic banking sector, geographical reach.