The Reserve bank does not support the Centre's view of consolidation in the banking sector. The UPA-led government says that consolidation is essential for the economy.

Emphasizing the need of making banking accessible to greater number of Indians, the bank's Deputy Governor KC Chakrabarty said that this was not the appropriate time for mergers and acquisitions in the system. He said, "Financial inclusion is more important than bank consolidation."

The RBI governor D Subbarao suggested the banks to strengthen their capital base to improvise on their risk management system.

Chakrabarty pointed out that 60 percent of the population did not have a bank account and 90 percent had zero access to banking services.

Speaking at the International Finance and Banking Conference', organised jointly by the Indian Merchants' Chamber and the Institute of Chartered Accountants of India, he said, "If there is a sweet shop in Churchgate (South Mumbai) and one in Virar ( an extended suburb in the north of Mumbai), the way is not fewer sweetshops, but more of them along the way."

Industry watchers said that this was not the first time that RBI was against the M&As. However, the analysts feel that with the centre getting active on financial sector reforms, chances of mergers are better this time.

Bank employees are unhappy with the consolidation in the industry. Around 4 lakh officers and employees have decided to go on a strike on 16th December to protest against the proposed merger of State bank of Indore with its parent company, State Bank of India and other possible mergers in the industry.