The idea of consolidation in the Indian banking sector has been put forward by Yogesh Agarwal, Chairman and Managing Director of IDBI Bank. He believes that the Union government should take more pragmatic moves towards the direction.

Inaugurating the bank's fifth branch in Lucknow, Agarwal said, "There is need for consolidation in the Indian banking sector and whenever it happens, IDBI will be at the centre of the activity."

Nonetheless he said that the consolidation would not happen unless the Centre presses on the agenda with determination. "Since, the government controls almost 70 percent of the Indian banking sector, it will have to take the process forward assiduously," he added.

"The consolidation can happen among government banks, between private banks and between private and government banks," he said.

IBDI has so far merged two banks including IDBI Bank and United Western Bank (UWB) with itself.

The bank is resorting to every possible move to increase its presence as well as business. "We started lending to small and medium enterprises (SME) last year and our SME portfolio is about Rs 1,500 crore at present. There is a great potential in the sector and we will remain bullish on SME lending," he said.

During this fiscal, the bank is going to set up 200 new branches for which it has received licenses from the RBI. IDBI will also open a new branch in Dubai by May while its branches in Singapore and Beijing will be opened before the end of this fiscal. "By 2012, we aim to create a total network of about 1,000 branches," said Agarwal.

IDBI Bank is also planning to hire staff of around 2,000-3,000 people in 2009-10 so as to keep in line with the expansion plans.

Further Agarwal said banks were adequately capitalized and "no viable project was being denied credit" even during the present phase of slowdown.

"The lending by Indian banks has actually grown by 19 percent from January 2008 to January 2009 and by almost 23 percent in FY09. The problem is other sources of funds such as capital market and foreign equity have dried due to meltdown and this has suddenly put immense pressure on banks," he said.