What was the purpose of the Inter-Creditor Agreement signed by Indian banks and financial institutions recently?
✓ Correct answer: d) To aim at faster resolution of stressed assets of ₹ 50 crore or more which are under consortium lending Indian Economy 281
ExplanationThe Inter-Creditor Agreement (ICA) was signed by Indian banks and financial institutions to expedite the reso- lution of stressed assets involving amounts of ₹50 crore or more under consortium lending arrangements.The ICA was part of the “Sashakt” committee recommendations which pro- posed a five-pronged strategy to tackle NPAs.The ICA provides a structured framework for multiple lenders to collaborate and resolve stressed assets efficiently.Key features include:Majority Decision Binding : If 66% of the lenders by value agree on a resolution plan, it becomes binding on all participating lenders.This was done to prevent individual holdouts from delaying resolutions.Timely ReAns: The agreement emphasizes prompt action, setting specific timelines to finalize and implement resolution plans.Asset Management Approach : It encourages the formation of independent asset management companies to manage and turn around distressed assets.160
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