NPA woes: IFC partners with JC Flowers to help lenders
The International Finance Corporation (IFC), a member of the World Bank Group, has partnered with US-based private investment firm JC Flowers & Company to help financial lenders in India resolve non-performing assets (NPAs).
Under the programme, which is an expansion of IFC's Distressed Asset Recovery Programme's (DARP) work in India, IFC will invest up to $100 million in the JC Flowers India Opportunities Fund, with an initial commitment of $40 million. The fund is a partnership with Eight Capital Management, an Indian distressed assets investment firm.
The distressed asset recovery programme focuses on acquiring and resolving distressed assets, the refinancing and roll-over risks of viable entities, and the restructuring of small enterprises.
This partnership will create India's first dedicated platform for mid-sized distressed assets, which accounts for $27 billion more than a third of stressed corporate assets.
Despite increasing demand for corporate resolution, the mid-sized segment is underserved due to a lack of large transactions and challenges investors face in identifying attractive opportunities.
The Reserve Bank of India's (RBI) estimates that a second wave of the pandemic could cause non-performing loans to reach $200 billion, which is nearly 15% of gross loans by September 2021.
This partnership aims to support an inclusive economic recovery and revitalisation of the economy, promote credit growth, and ensure the continuity of hardest-hit businesses and livelihoods.
In addition to its investment, IFC will also support JC Flowers and Eight Capital to adopt environmental and social standards in accordance with the IFC performance standards.
Since its launch in 2007, the DARP has committed $7.7 billion globally, including $5 billion mobilised from outside. It has also enabled banks to offload over $3 billion of NPAs and help over 18 million debtors resolve their obligations.
Also read: Why India’s GDP is leaking!