SBI launches $1 bn stressed assets fund with Brookfield AMC

Country's largest lender SBI and Brookfield Asset Management have set up a joint venture with initial commitment of over USD 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 per cent of the total investments into stressed assets, the state-owned bank said in a 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," Chairman Arundhati Bhattacharya said in the statement.
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.
Increased presence in all terrains and geographies

will increase bank's deposit raising capacity and bring down the cost of funds further. Thus, the benefit so derived will flow on to the customers in the form of improved services, borrowing costs etc, it added.
The bank also expects the merger to fasten the roll out of digital initiatives, which is currently hamstrung by existence of different entities with separate managements causing a lag in implementation across the the SBI Group.

It also expects reduction in overheads, administrative offices, and centralisation of treasury will lead to major reduction in operating costs.
Post mergers, the bank will re-deploy manpower in customer facing roles with a sharper marketing focus. The same is expected to create a superior customer experience.
On the additional capital requirement (which the chairperson had earlier pegged at around Rs 3,000 crore) arising due to the mergers will be met through the resultant increase in efficiencies and economies of scale.
During the June quarter earnings, chairperson Arundhati Bhattacharya had said that the merger will lead to shuttering of the treasury desks of the merged entities but had ruled out massive closure of retail branches, though she said there would be rationalisation of branches specially in cities.

The SBI had first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged.
SBI was founded on June 2, 1806, as Bank of Calcutta and on 27 January 1921, it was renamed as the Imperial Bank of India. On July 1, 1955, it was formally named as State Bank of India after nationalisation.