UPSC Prelims 2019·GS1·economy·money and banking

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

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Last updated 8 Jul 2026, 4:39 pm IST
  1. ATo lessen the Government of India's perennial burden of fiscal deficit and current account deficit
  2. BTo support the infrastructure projects of Central and State Governments
  3. CTo act as independent regulator in case of applications for loans of ₹ 50 crore or more
  4. DTo aim at faster resolution of stressed assets of ₹ 50 crore or more which are under consortium lendingCorrect

Explanation

The Inter-Creditor Agreement (ICA) was signed by public sector banks and some private lenders in India in July 2018. It was part of the 'Sashakt' project, proposed by a committee headed by Sunil Mehta. The primary purpose of the ICA was to streamline and expedite the resolution of stressed assets (Non-Performing Assets or NPAs) in cases where a borrower had taken loans from multiple banks (consortium lending). The agreement provided a framework for different lenders to collectively decide on a resolution plan (e.g., through restructuring, change in management, or liquidation) for accounts with stressed assets of ₹50 crore or more, ensuring faster and more effective decision-making and implementation without individual bank approvals causing delays.

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