What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

To lessen the Government of India's perennial burden of fiscal deficit and current account deficit

To support the infrastructure projects of Central and State Governments

To act as independent regulator in case of applications for loans of 50 crore or more

To aim at faster resolution of stressed assets of 50 crore or more which are under consortium lending

APEDIA

UPSC Prelims

2019 • 02 Jun, 2019 • Paper-1

What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?

Correct Answer

To aim at faster resolution of stressed assets of 50 crore or more which are under consortium lending

Context of the Agreement: The Inter-Creditor Agreement (ICA) was formulated as a critical component of 'Project Sashakt' (the Sunil Mehta Committee recommendati......

💡 Analysis & Explanation

Context of the Agreement ▼

The Inter-Creditor Agreement (ICA) was formulated as a critical component of 'Project Sashakt' (the Sunil Mehta Committee recommendations) to aggressively tackle the mounting issue of Non-Performing Assets (NPAs) choking the Indian banking system.

Operational Objective ▼

The agreement was signed by multiple banks and NBFCs to establish a binding collaborative framework. Its specific, pinpointed aim is the speedy and coordinated resolution of large stressed assets (specifically bad corporate loans of ₹50 crore or more) where multiple lenders (a consortium) are involved. It prevents agonizing delays previously caused by one or two dissenting minority creditors.

Conclusion ▼

Option D perfectly defines the exact scope, financial threshold, and aim of the ICA.

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What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?