UPSC Prelims 2019 Question:

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

Explanation:

• Inter-Creditor Agreement (ICA) is a legally enforceable contract between various lenders within the same capital structure. In ICA lenders stipulate in advance on resolving their competing interests and working in tandem to serve their mutual borrower.
  
  
• ICA was framed under Indian Banks Association and it follows the recommendations of the Sunil Mehta Committee on stressed asset resolution. Public, private, and foreign banks have signed this agreement under Sashakt Plan for faster resolution of stressed assets outside the Insolvency Courts. The decision making in ICA is by way of approval of majority lenders. ICA is applicable to all corporate borrowers with a loan amount of ₹50 crores or more under consortium lending / multiple banking arrangements.
  
  

Therefore, option (4) is the correct answer.

Subject: Economics | Money and Banking