Question
GSMediumPrelims 2019Economy

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

Explanation

The Inter-Creditor Agreement (ICA) was a key component of Project Sashakt, launched based on the recommendations of the Sunil Mehta Committee to fast-track the resolution of Non-Performing Assets (NPAs) in the Indian banking system. It specifically targets stressed assets of ₹50 crore or more held under consortium lending. The agreement mechanism stipulates that if 66% of the lenders (by value) agree to a resolution plan, it becomes binding on all other lenders in the consortium. This prevents individual dissenting banks from stalling the recovery process, ensuring a more efficient turnaround for bad loans.

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