Shutting out foreign funds hurts India's bad-debt market, says BofA

India’s distressed debt market is being hobbled by rules that bar foreign funds from directly buying up bank loans, according to Bank of America Corp.

In the past year, the US lender has had to team up with local asset reconstruction companies to purchase loans made to firms including Seven Hills Hospitals and GTL Infrastructure Ltd. that had soured. As it scouts for more opportunities in the nation with the world’s worst non-performing debt ratio, the requirement for local partners is a hindrance, said Jayesh Mehta, country treasurer at Bank of America Merrill Lynch.

“Current regulations demand that a foreign bank must