India needs 4-5 "SBI size" banks to meet the growing needs of the economy and industry, Finance Minister Nirmala Sitharaman said on Sunday. Addressing the 74th Annual General Meeting of the Indian Banks' Association (IBA), she said the industry needs to imagine how Indian banking has to be in the immediate and long-term future.

As far as the long-term future is concerned, she said it is going to be largely driven by digitised processes and there is a need for seamless and interconnected digital systems for a sustainable future for the Indian banking industry. "Although I did say that in the amalgamation process, your systems have spoken to each other, there wasn't a problem of those amalgamating banks. And, I remember the banking secretary at that time, Rajiv Kumar, telling me that we have ensured that the amalgamating banks do have their systems in such a way that they can align with each other," she said.

Mega consolidation was announced in 2019 when Kumar was the financial services secretary but was implemented by his successor Debasish Panda effective April 2020. As part of the mega consolidation exercise, Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank; Syndicate Bank into Canara Bank; Andhra Bank and Corporation Bank into Union Bank of India; and Allahabad Bank into Indian Bank.

Following the consolidation, there are now seven large public sector banks and five smaller ones. There were as many as 27 public sector banks (PSBs) in 2017. Kumar, now an Election Commissioner of India, was instrumental in laying a digital pipeline that was leveraged during the pandemic to transfer money into accounts of crores of the vulnerable and needy with a click of button.

The finance minister said banks, whether public or private sector, cannot work in digital silos and systems should be speaking to each other. "So, I would think that's one of the areas in which you would give some more time and make sure that bridge crossed," she said.

Appreciating the efforts of bankers to carry out smooth consolidation exercise during the challenging time of the pandemic, the Finance Minister said it did not cause inconvenience to the customer and there was no aberration. "Amalgamation, after all, is an important exercise even as important to the Indian Banks' Association because of the way in which the economy is shifting to a different plane altogether, the way in which economy together with the industry is also looking at various different ways of adapting to a post-pandemic era...", she said.

Asserting that the driving force for the amalgamation was to build scale, Sitharaman said India needs a lot more banks and a lot of global size banks. "India needs at least four different SBI size banks. So, one of the driving forces was for the amalgamation that we need to scale up banking.

"We need to scale up banking to meet the new changing and growing requirements but that was thought of even before the pandemic. Now, all the more reason why we would need four or five more SBIs in this country," she said. Paying homage to bankers who lost their lives in the line of duty during the pandemic, the finance minister urged IBA to help and support the families of the deceased.

"I do pay my humble homage to those who have served, but also suffered because of the pandemic but unfortunately couldn't survive it. I am sure the IBA will do everything that it takes to support their families, and keep them spirited and morally sound because the loss is irreparable," she said. IBA came into being in 1946 with 22 members has grown into 244 members from the public, private, foreign, co-operative banks besides financial institutions and NBFCs. Observing that not many organisations or associations have the fortune of having their course of establishment and lifespan running parallel to that of its own countries, Sitharaman said "several of your milestones match with the Indian economic history".

Going forward, she said IBA is going to derive the benefit of a greater vibrant economy that India is becoming as much as contributing to that.