What was the purpose of Inter-Creditor Agreement signed by Indian banks and financial institutions recently?
[UPSC Civil Services Exam – 2019 Prelims]
(a) To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit
(b) To support the infrastructure projects of Central and State Governments
(c) To act as independent regulator in case of applications for loans of RS 50 crore or more
(d) To aim at faster resolution of stressed assets of Rs 50 crore or more which are under consortium lending
Answer: (d)
Explanation:
- The Inter-creditor Agreement is designed to facilitate the resolution of loan accounts exceeding ₹50 crores that are held by a consortium of lenders.
- This agreement has been endorsed by 22 public sector banks, 19 private sector banks, and 32 foreign banks, along with 12 major financial intermediaries such as LIC and HUDCO.
- It forms a crucial part of the government-approved “Sashakt” plan, which aims to address the issue of resolving non-performing assets effectively.
- The Intercreditor Agreement is a recommendation put forth by the Sunil Mehta committee, aiming to expedite the resolution process for distressed assets.
