Inter-Creditor Agrrement (ICA)

Inter-Creditor Agreement (ICA)

⏩More than 50 banks and financial institutions in India have entered into a inter-creditor agreement to speed up the resolution of stressed assets of Rs 50 crore and above that are under consortium lending.

⏩The inter-creditor agreement is aimed at the resolution of loan accounts with a size of Rs 50 crore and above that are under the control of a group of lenders. It is part of the "Sashakt" plan approved by the government to address the problem of resolving bad loans.

⏩The agreement is based on a recommendation by the Sunil Mehta Committee that looked into resolution of stressed assets.

⏩The agreement says if 66% of lenders by value agree to a resolution plan, it would be binding on all lenders. the dissenting creditors will, however, have the option to sell their loans to other lenders at a discount of 15 % to the liquidation value, or buy the entire portfolio paying 125% of the value agreed under the debt resolution plan by other lenders.