SBI, Brookfield Asset Management to Join Forces for Stressed Asset Fund
State Bank of India has signed an agreement with U.S.-based asset reconstruction company Brookfield Asset Management to form a joint venture that will buy and rehabilitate stressed assets.
As part of the joint venture, Brookfield will bring around Rs 7,000 crore to the table, while State Bank of India has agreed to commit up to 5 percent of total investments into stressed assets, according to a press release by India’s largest lender.
There’s an urgent need for foreign funds to participate in the bad loan resolution process, SBI Chairman Arundhati Bhattacharya told BloombergQuint in an interview in June. Indian asset reconstruction companies lacked the capital to make a significant contribution, according to Bhattacharya.
Total bad loans in the banking system grew to 7.6 percent of total loans by the end of March 2016, from 5.1 percent at the end of September 2015.
Currently, the partnership is only restricted to SBI and Brookfield, though in the future, it could seek participation from other lenders, SBI said in the release.
Bhattacharya is quoted in the release as saying that partnering with a foreign asset reconstruction company would be acceptable to both borrowers and lenders in cases where promoters are unable to infuse fresh equity, and lenders are unwilling to increase exposure by extending more loans.
Headquartered in New York, Brookfield has assets worth $240 billion under management.