MUMBAI: A staggering 85 public, private and foreign banks and financial institutions on Monday signed yet another jargon-spouting pact titled the Inter-Creditor Agreement (ICA) to speed up the resolution of 400 loan accounts that borrowed over Rs 50 crore each. Lenders including SBI, India Post Payments Bank, Hudco, PFC and LIC have signed the pact that targets faster recovery of all or part of the Rs 6.2 lakh crore that has gone sour.
According to V G Kannan, CEO, Indian Banks’ Association, the agreement has already been approved by boards of 19 banks.The move comes a year after the RBI’s shortlist comprising 12 large accounts for resolution under the Insolvency and Bankruptcy Code (IBC), of which only two were successful so far.
The ICA framework, part of Project Saskhakt, differs from past arrangements in two aspects. One, it gives the lead lender sweeping power to submit the resolution plan, with recommendations from the Overseeing Committee. Two, it calls for approval of ‘majority lenders’, or those with 66 per cent share in the aggregate exposure, which will then be binding on all others that are party to the ICA.
The framework authorises the lead bank to implement a resolution plan in 180 days prepared and submitted to the Overseeing Committee with inputs from industry experts for operation turnaround of the assets within RBI’s stipulated time-frame of 180 days and in compliance with the RBI and other applicable laws and guidelines. The resolution plan will be presented to the lenders for approval.
As for dissenting lenders, the lead lender will have the right but not the obligation to arrange for buy-out of the facilities of the dissenting lenders at a value that is equal to 85 per cent of the liquidation value or resolution value — whichever is lower.