UPDATE 1-Canada's Brookfield plans $1 bln investment in Indian distressed assets
* Brookfield, SBI to set up JV to invest in distressed assets
* Indian banks battling $120 bln of soured debt (Adds details of plan and comments by executives and analyst)
By Devidutta Tripathy
MUMBAI, July 20 (Reuters) - Canada's Brookfield Asset Management Inc plans to invest about $1 billion in Indian distressed assets through a joint venture with the largest lender in the South Asian nation where banks are battling a record $120 billion of sour debt.
Brookfield and State Bank of India have signed a preliminary agreement to set up a joint venture for the investments, the firms said on Wednesday. SBI aims to contribute up to 5 percent of the total investments targeted by the venture, which may also rope in other banks at a later stage, they said.
Indian banks, with 11.5 percent of their loans soured, are under pressure from the regulator and the government to clean up their books as higher bad loans choke fresh lending in an economy whose main source of funding is bank credit.
The government earlier this year eased rules for bad-loan buyers, and was also in talks with banks to help set up funds to deal with distressed assets.
The scale of the opportunity and the rule easing are drawing other foreign companies such as J.C. Flowers & Co and Canada Pension Plan which have announced plans to invest in the Indian distressed assets space.
Brookfield, which manages about $240 billion of assets globally, has previously invested in the Indian real estate and infrastructure sector. The 70 billion rupees ($1.04 billion) that it has committed to invest through the venture with SBI will be its biggest through a single venture in India. Continued...