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

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

Bloomberg 

Bank of America, BofA

India’s distressed is being hobbled by rules that bar foreign funds from directly buying up bank loans, according to 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 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 Merrill Lynch.

“Current regulations demand that a foreign bank must bid through the ARC route when a distressed debt is auctioned,” Mumbai-based Mehta said in an interview. “We should have regulations providing direct access for foreign companies to bid without an intermediary. This change is required to create depth in the distressed

Twenty-nine asset reconstruction companies have been set up in India under a 2002 law passed to help reorganize non-performing credit, RBI data show, though many of these haven’t been active due to a lack of funds.

While overseas investors including KKR & Co, and SSG Capital Management Ltd. have either set up their own asset reconstruction companies in India or bought into existing ones, others like and SC Lowy have structured deals through such firms by paying them a fee.

First Published: Wed, February 20 2019. 10:07 IST
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