Intercreditor Agreement Upsc
December 10th, 2020
December 10th, 2020
The agreement between creditors aims to liquidate credit accounts of 50 crore or more in size, under the control of a group of lenders. It is part of the government-approved “Sashakt” plan to address the problem of solving non-performing loans. More than a dozen lenders, led by the State Bank of India, recently signed the Inter-Creditor Agreement (ICA). The country`s lenders have signed an agreement known as the Inter-Creditor Agreement (ICA) to give the consortium`s lead lender the power to develop a plan to resolve the most stressed assets. Background: More than 50 banks and financial institutions in India have reached an agreement between creditors to accelerate the liquidation of stressed assets of 50 kronor or more, which are under syndicated loans. The agreement stipulates that if 66% of lenders approve a resolution plan in value, it would bind all lenders. However, derogatory creditors have the option of selling their loans to other lenders with a 15% discount on the liquidation value or buying the entire portfolio that pays 125% of the value agreed in the debt settlement plan by other lenders. A senior debt credit agreement consists of sensitive issues, such as interest charges, costs and allowances, which favour the priority lender over junior lenders. It is also common for a primary lender to be able to modify them without the consent of a junior lender.
Therefore, a junior lender should negotiate a cap on the amount of priority debt and ensure that there is a clause preventing the priority lender from changing the terms of the priority loan. Some 22 public sector banks (including India Post Payments Bank), 19 private lenders and 32 foreign banks signed the creditor agreement (ICA) to speed up the resolution of stressed assets. The agreement provides that each resolution plan is submitted to a supervisory committee made up of experts from the banking sector. For derogatory creditors, the agreement states that “the credit bank has the right, but not the obligation, to arrange the purchase of the credit facilities at a value equal to 85% of the liquidation or the value of the liquidation, depending on the deadline.” The junior lender should consider meeting the contractual terms for the project in the event of a delay in payment from the borrower.