YES, THREE GOVT BANKS TO FLOAT ASSET RECONSTRUCTION COMPANY

Private sector

Yes Bank is planning to form an asset reconstruction company (ARC) in partnership

with a foreign lender and three public sector banks — Bank of Baroda, Union Bank of

India and Bank of India — in the next 6-9 months.

Sources close to the development said that the ARC would be capitalized at about Rs

110 crore. While Yes Bank will hold a 29.5 per cent stake in the venture, the three

local banks will have a combined 33 per cent stake and the balance 37.5 per cent being

offered to the foreign partner.

Yes Bank, which was earlier in talks with JP Morgan for its ARC foray is now scouting

for a new foreign partner.

“The foreign partner would be a US-based lender. The bank has received the first level

of RBI approval, but the foreign partner has not yet been finalized,” said the source.

According to the

foreign direct investment (FDI) norms, a foreign partner cannot hold more than 49

per cent stake in an Indian firm. For taking stake in the ARC, the foreign partner

will also have to seek an approval from the Foreign Investment Promotion Board (FIPB).

“With the stock of non-performing assets (NPAs) growing with Indian banks, there could

not be a better circumstance than now to enter the ARC business. Yes Bank expects to

acquire assets worth more than Rs 1,000 crore during the first year for the business,”

the source added.

However, unlike other established ARC players such as Arcil and IARC, the Yes Bank-led

ARC is not expected to look at acquiring retail NPAs from banks.

“To begin with, Yes Bank will look at acquiring long-term assets, mostly on the

corporate loan books,” the source said.

After closing

investments for the Global Environment Fund, Yes Bank is looking at launching

its second private equity fund — Distressed Assets Fund — in April. The bank has

partnered with a West Asian bank to launch this Rs 500-crore fund.

The bank plans to launch a Rs 300-crore Social Sectors Fund, a real estate fund, and

an infrastructure fund in the next two years

Courtesy:- BS dtd:- 05-03-09