What is Intercreditor Agreement(ICA) and how it works?

Intercreditor Agreement(ICA)

An Intercreditor Agreement, commonly referred to as an intercreditor deed, is a document signed between two or more creditors(banks), stipulating in advance how their competing interests are resolved and how to work in tandem in service to their mutual borrower. The inter-creditor agreement is aimed at the resolution of loan accounts with a size of ₹50 crore and above that are under the control of a group of lenders. It is part of the “Sashakt” plan approved by the government to address the problem of resolving bad loans. 

In general, the ICA is an agreement among banks that have dues from a borrower in stress. The pact mandates the lead bank to formulate a resolution plan that will be executed in a time bound manner.

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The move comes after the banking regulator(RBI), dismantled all the existing resolution mechanisms, such as the joint lenders forum, and asked lenders to start resolution for the asset even if the default was by one day.

The ICA is applicable to all corporate borrowers who have availed loans for an amount of ₹50 crore or more under consortium lending / multiple banking arrangements.  The lender with the highest exposure to a stressed borrower will be authorised to formulate the resolution plan which will be presented to all lenders for their approval.

Dissenting lenders can either sell their exposure to another lender at a 15% discount or buy the entire exposure of all the banks involved, at a 25% premium.


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