Brookfield set up JV with SBI, announces Rs.7,000 cr fund for bad loans

Brookfield Asset Management committed Rs.7,000 crore to buy NPAs in India through JV with SBI.

The Dollar Business Bureau 

 Canada's Brookfield Asset Management on Wednesday committed Rs.7,000 crore to buy bad loans in India in collaboration with SBI.

"The JV will independently evaluate and invest in various stressed assets, and will rely on Brookfield's operational expertise to manage recapitalized businesses," a joint statement said.

 SBI said it has pledged up to 5% of its investments into stressed assets, and its joint venture with Brookfield will motivate involvements from other lenders at a later stage.

At present, the commercial banks’ stressed loans have reached over Rs. 8.2 lakh crore. Banks are creating in-house departments or selling their loans to ARCs (asset reconstruction companies) to deal with bad loans.

ARCs issue, security receipts to the commercial banks in exchange of the loans they buy. The asset management company will bring in new partners to turn around troubled businesses.

"This is a great opportunity for us to continue to invest in the long-term India story, and we're pleased to be expanding our private equity platform here." Bulk of Brookfield's global assets is in property followed by the power and infrastructure sector,” said Brookfield India head Anuj Ranjan.

SBI Chairman Arundhati Bhattacharya hoped the joint venture with global companies will help Indian commercial banks get an alternate solution to the issue. This approach will be more acceptable to both lenders and borrowers in cases where promoters are unable to infuse funds and lenders are reluctant to take additional exposure, Bhattacharya said.

The government has been planning to set up a stressed asset fund to provide debt capital or equity to stressed companies. In May this year, the Indian Banks Association had mooted a proposal, seeking RBI's view on stressed asset fund.

The Dollar Business Bureau - Jul 21, 2016 12:00 IST