Intercreditor Agreement India Upsc

The country`s lenders have signed an agreement among themselves, known as an inter-creditor agreement (ICA), to give the consortium`s main lender the power to establish a plan to resolve stressed assets. Background: More than 50 banks and financial institutions in India have reached an agreement between creditors to accelerate the resolution of stressed assets of Rs 50 billion and more under syndicated loans. The agreement is a “big step forward” in managing the problem of non-performing loans, since it is developed by the banks themselves, and reflects the determination of the bankers to find together a solution to the tense wealth chaos. Almost the entire banking system and leading NBF, such as REC, PFC, join the ICA which, in the past, has for decades retained a quick and efficient resolution of stressed assets. Some 22 public sector banks (including India Post Payments Bank), 19 private lenders and 32 foreign banks have signed the Inter-Creditor Agreement (ICA) to accelerate the resolution of stressed assets. The agreement states that if 66% of lenders approve a resolution plan by value, this would be binding on all lenders. However, dissenting creditors have the option of selling their loans to other lenders at a 15% discount on the liquidation value or buying the entire portfolio against payment of 125% of the agreed value by other lenders under the debt settlement plan. More than a dozen lenders led by the State Bank of India recently signed the Inter-Credit Agreement (ICA). The agreement contains a standstill clause that prevents all lenders from taking legal action against the borrower to recover fees. During the standstill period, lenders are prohibited from transferring or assigning their loans to third parties other than a bank or financial enterprise. The standstill regime will be in effect for 180 days from the deadline – the RBI had asked lenders to terminate their restructured loans within 180 days from March 1 or refer them to the insolvency court. However, this provision would not prevent lenders from taking action against borrowers or administrators for criminal offences.

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