Associated Chambers of Commerce and Industry (Assocham) says that consolidation I the Indian Banking sector is necessary to enhance global competitiveness.

The UPA-led government says that consolidation is essential for the economy. However RBI is not in favour of consolidation.

According to a study, the size of Indian banks in terms of their assets is too small to make optimum use of their capacities for raising capital at globally competitive rates.

It said that the balance sheets of leading Indian banks suggested a need of consolidation to avail the benefits of huge globally competitive Indian banks.

Presently, banks are not able to compete in the global arena in terms of fund mobilization, loan disbursal, investment and rendering of financial services due to fragmented nature of the industry.

"Therefore, consolidation to certain degree is highly warranted to ensure substantial increase in assets base of Indian banking system, besides enhancing their global competitiveness," Assocham President Swati Piramal said.

Dismissing apprehensions regarding the likelihood of a big bank failure, the study says that the size of Indian banks is quite small as the total assets of the top 10 banks account for less than 60 percent of the GDP.

Bank employees are also unhappy with the consolidation steps being adopted. The bank staffs have decided to go on a strike on December 16.