Russia's VEB approves $917 mln loan to Alfa Bank

MOSCOW Sep 1 (Reuters) - Russia's state-owned VEB bank approved a 29.2 billion rouble ($917.3 million) subordinated loan to Alfa Bank, the country's biggest privately owned lender, Alfa Bank said in a press release on Tuesday.

The government has obliged VEB to provide subordinated loans to banks in order to kick start lending to companies and restore industrial growth.

Alfa is struggling with losses as bad loans rise, putting pressure on its capital, and the bank's management said earlier it was expecting zero profit this year.

"Alfa Bank will channel the financing to lend to Russia's industrial companies," Andrei Sokolov, Alfa Bank's first deputy chief executive, said in the release.

The loan facility bears an interest rate of 9.5 percent and matures in 2020.

Russia's economy is battling its first contraction in a decade as the global credit crunch effectively cuts off wholesale funding for Russian companies, while local banks are unwilling to lend amid deteriorating asset quality. (Reporting by Dmitry Sergeyev; Editing by David Holmes) ($1=31.83 Rouble)