What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?
[amp_mcq option1=”To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit” option2=”To support the infrastructure projects of Central and State Governments” option3=”To act as independent regulator in case of applications for loans of ₹ 50 crore or more” option4=”To aim at faster resolution of stressed assets of ₹ 50 crore or more which are under consortium lending” correct=”option4″]
This question was previously asked in
UPSC IAS – 2019
The Inter-Creditor Agreement (ICA) was signed by major Indian banks and financial institutions as part of the ‘Sashakt’ scheme for resolving stressed assets, particularly large value Non-Performing Assets (NPAs) under consortium lending (where multiple banks have lent to the same borrower). The ICA aims to facilitate faster decision-making among lenders regarding resolution strategies (like restructuring, liquidation, change in ownership, etc.) for stressed accounts involving multiple creditors, especially those with total exposure of ₹ 50 crore or more. This helps avoid delays in resolving bad loans which arise when multiple banks with different stakes and priorities are involved.
The Inter-Creditor Agreement is a mechanism among lenders to speed up the resolution of stressed assets under consortium lending.