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

To lessen the Government of India’s perennial burden of fiscal deficit and current account deficit
To support the infrastructure projects of Central and State Governments
To act as independent regulator in case of applications for loans of Rs. 50 crore or more
To aim at faster resolution of stressed assets of Rs. 50 crore or more which are-under consortium lending

Answer: (d) To aim at faster resolution of stressed assets of Rs. 50 crore or more which are-under consortium lending.

An Inter-Creditor Agreement (ICA) is an agreement between one or more creditors (lenders), who have shared interests in a particular 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.
The Intercreditor Agreement, a recommendation of the Sunil Mehta committee, aims to deal with bad loans as an attempt to speed up the Resolution of stressed Assets.