SBI to form JV with Canada's Brookfield for stressed assets recovery fund
20 July 2016
State Bank of India (SBI), India's top lender and the holder of the country's largest portfolio of stressed assets, is setting up a joint venture with Canada's Brookfield Asset Management Inc aiming to recover bad loans that are blocking the lender's ability to lend further.
Brookfield plans to pump in about $1 billion into the proposed joint venture that will invest in distressed assets in the country, while SBI will contribute 5 per cent of the total share capital of the JV.
''SBI and Brookfield propose to form a joint venture (JV), whereby Brookfield will commit approximately Rs 7,000 crore and SBI up to 5 per cent of total investments into stressed assets," the public sector lender said in its release.
The fund will independently evaluate and invest in various stressed assets, and will rely upon the Canadian asset manager's operational expertise to manage recapitalized businesses.
''The proposed JV may, at a later stage, seek participation from other lenders in the identified assets,'' the release stated.
This joint venture is a part of its ongoing stress asset resolution process.
This approach of collaborating with global players will enable banks in general and SBI in particular to find alternate solution for resolution of stressed assets, SBI chairperson Arundhati Bhattacharya said.
This, she added, 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.
SBI, the country's biggest lender, reported a 24 per cent decline in profit to Rs9,950.65 crore in FY16 compared with FY15 due to higher provisioning for stressed assets. Its net non-performing assets doubled to Rs55,807 crore from Rs27,590.6 crore in same period.
To clean up the balance sheet of banks, the Reserve Bank of India had announced an asset quality review in 2015 and since then banks gross non-performing assets have jumped 70 per cent in six months ended March 2016.