India's largest lender SBI launches $1-bn stressed assets fund with Brookfield AMC
State Bank of India, India's largest lender and Brookfield Asset Management have set up a joint venture with initial commitment of over $1 billion to make investments in businesses with stressed assets.
Brookfield will commit around Rs 7,000 crore and State Bank of India up to 5 percent of the total investments into stressed assets, the state-owned bank said in a statement. Chairman Arundhati Bhattacharya said in the statement.
This approach of collaborating with global players will enable the banks in general and SBI in particular, to find alternate solution for resolution of stressed assets
The JV will evaluate and invest in various stressed assets, relying upon Brookfield's operational expertise to manage recapitalised businesses. Bhattacharya said such an approach will be more acceptable to both the lenders and the borrowers in cases where the promoters are not able to infuse funds and lenders are reluctant to take additional exposure. At a later stage, the JV may seek participation from other lenders in the identified assets, the bank said.
Elevated stressed assets hit profitability of the banks in FY16 and analysts believe that may continue in 1HFY17 as well. To clean up the balance sheet of banks, the Reserve Bank of India announced asset quality review in 2015 and since then banks gross non-performing assets jumped 70 percent in six months ended March 2016.
SBI, the biggest lender in particular, reported a 24-percent decline in profit at Rs 9,950.65 crore in FY16 compared with FY15 due to higher provisions. Net non-performing assets doubled to Rs 55,807 crore from Rs 27,590.6 crore in same period.
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