PSBs consolidation not a meaningful reform: Ruchir Sharma

Stressing that India's public sector units are 'far too bloated', Morgan Stanley's Chief Global Strategist Ruchir Sharma said the government's proposal to consolidate state-run lenders is not a meaningful reform.
"I think consolidation of bank is not a meaningful reform, it will further slow down privatisation of PSU banks... Government is too scared to deal with privatisation that's why it is going for consolidation of banks," Sharma, Head of Emerging Markets and Chief Global Strategist at Morgan Stanley Investment Management told PTI.
Noting that India's public sector is far too bloated, he said, "Privatisation is a dirty word in this country, and India basically has carried out privatisation by malign neglect."

Sharma pointed out that India has not done privatisation of PSUs but the PSUs have gradually lost their value.
"The average (state-owned banks lending) in developing country is 33 per cent," he said.
Sharma, however, said that he is not saying that India should not have state-run enterprises but "PSUs need to be in balance".

Blaming bad debt for slow credit growth in PSU banks, he said public ownership in PSU banks has to come down.
The government is considering consolidation of public sector banks (PSBs) in order to strengthen the banking system.
In his Budget for 2016-17, Finance Minister Arun Jaitley stated that a road map was being formulated for consolidation of PSBs and an expert committee would be constituted.

The State Bank of India -- the country's largest public lender -- has started the process of merging six banks, including its five associate banks, with itself.