SBI has been reeling under a mountain of bad loans for the past few years as the key sectors in the economy are faltering.
Out of the total investible fund of Rs 7,350 crore, the New York-based Brookfield, which manages a whopping $240 billion assets, will contribute Rs 7,000 crore (Rs 70 billion) and the remaining 5 per cent or Rs 350 crore (Rs 3.5 billion) will come from SBI, a senior SBI official told PTI.
When asked how soon the fund will be operationalised, the official said it will set up at the earliest and will be managed by Brookfield and the top management of the bank.
Asked whether the fund will primarily snap up SBI's stressed assets, the official said "yes."
"But we will also be open to others. SBI being the lead lender in most of the large accounts, most of the assets will be ours," the official added.
SBI Chairman Arundhati Bhattacharya said, "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."
SBI has been reeling under a mountain of bad loans for the past few years as the key sectors in the economy are faltering.
Its net non-performing assets stood at 3.81 per cent or Rs 55,807 crore (Rs 558.07 billion) as of March 2016, against 2.12 per cent (Rs 27,591 crore) a year ago, while its gross NPAs jumped to 6.5 per cent from 2.5 per cent a year ago.
This is the second such fund after Kotak Bank roped in Canadian Pension Plan Investment Board (CPPIB) to launch a USD 525 million fund to invest in the stressed assets in March.
The proposed joint venture will independently evaluate and invest in various stressed assets, and will rely on the New York Brookfield's operational expertise to manage recapitalised businesses, SBI said.
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.
SBI said at a later stage the joint venture may seek participation from other lenders in the identified assets.
"This is a great opportunity for us to continue to invest in the long-term India story, and we're pleased to be further expanding our private equity platform here," Brookfield India head Anuj Ranjan said.
This March, Kotak Mahindra Group tied up with the Canadian Pension Plan Investment Board (CPPIB) to launch a $525 million fund to invest in the stressed assets. The CPPIB has committed $450 million and the Kotak Group $75 million.
The Reserve Bank last December conducted an asset quality review (AQR) which covered 36 banks (including all state-run banks) which accounted for 93 per cent of the gross advances.
After the AQR, net NPAs in the banking system rose sharply to 7.6 per cent in March 2016 from 5.1 per cent in September 2015, while the total stressed loans including the restructured accounts crossed 13 per cent of the system or over Rs 8 trillion as of March 2016.
In fiscal 2015-16, SBI's net profit declined 24 per cent to Rs 9,951 crore (Rs 99.51 billion) from Rs 13,102 crore (Rs 131.02 billion) in 2014-15.
For the March 2016 quarter, SBI's net declined by 66.2 per cent to Rs 1,264 crore (Rs 12.64 billion) from Rs 3,742 crore due to higher provision for stressed assets.
SBI's net non-performing assets stood at 3.81 per cent or Rs 55,807 crore (Rs 558.07 billion) as of March 2016, against 2.12 per cent (Rs 27,591 crore) a year ago, while its gross NPAs jumped to 6.5 per cent from 2.5 per cent a year ago.