• From: sbistcbangalore@xxxxxxxx
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Wed, 24 Dec 2003 10:52:15 +0500

Buyers of bad loans find India a better bargain than China

MUMBAI: India , compared to China , offers greater opportunities to investors 
keen on acquiring stress assets. However ‘critical mass and clarity on cost 
structure’ will also be a key consideration for investors wishing to buy bad 
loans here, said Divid Edmonds, lead partner, international advisory group at 
PwC. “Investors will go to a country only when they know with certainty the 
legal process... China has no legal process, no recovery process.” 

An investor would want to know the volume of non-performing assets available 
for them to invest in. “If investors have to set up an office in India , they 
should be in a position to acquire stress assets portfolio of $20m to justify 
their presence here,” Mr Edmonds said. He was speaking to the media at the 
sideline of IBA seminar on ‘International experience in NPA management’. 

The gross NPAs of scheduled commercial banks in India stood at Rs 68,714 crore 
and net NPAs at Rs 32,764 crore as on March ‘03. The gross NPA in India is 
close to 8.8%, while that in China is estimated at 35-40%. 

He said investors like NewBridge, Lone Star, Cererus, Merrill Lynch, GE Capital 
and Morgan Stanley have shown interest in India for bad loans.  However, he 
felt that India will need to revisit the tax structure to make it easier for 
investors wishing to acquire bad loans here. He also felt that India needs to 
create a legal system that would bring the borrower to the table as soon as the 
problem begins. “This is because the biggest killer of value is time,” said Mr 

In Australia and the UK , the recovery is within three months, but 
surprisingly, most of the European countries are lagging behind in putting in 
place a proper legal system. Recovery takes very long in Germany and Italy , he 
said. Despite this, Japan and Germany still remain attractive markets for 
vulture funds because these are the second and third largest economies and 
“investors would want their presence there”. PwC is of the view that returns 
would be better in India than in Germany . 

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