State Bank of India is supportive of another wave of mergers among state-backed lenders as policymakers explore ways to build scale and finance growth in the world’s fastest-growing major economy.

“Some further rationalisation might make sense. There are still some smaller, sub-scale banks,” Challa Sreenivasulu Setty, Chairman of the country’s biggest bank, said in an interview with Bloomberg News in Mumbai. “If another round happens, it may not be a bad idea,” he said.

Mumbai-based SBI controls about one quarter of India’s Rs 194 trillion ($2.18 trillion) loan market. A wave of local mergers over the past decade has left 12 state lenders competing with private and foreign players such as HDFC Bank Ltd. and HSBC Holdings Plc. With a balance sheet of $787 billion, SBI dominates the indust

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