But there is still an important role for monetary policy (Gruen and Shuetrim 1994, and Gruen, Romalis and Chandra 1997). The moral is: don’t expect monetary policy to be able to eliminate the cycle, but don’t ignore its ability to “top and tail” the fluctuations.
The RBI has been supportive of the initiatives for consolidation and there have been no cases so far where the approval for merger of banks was denied by the RBI, since the proposals conformed to the requirements and guidelines of the RBI.