INSUBCONTINENT EXCLUSIVE:
Mumbai: Many banks in the country are set to sign an inter-creditor agreement on Monday to deal with stressed assets after getting a
conditional approval from the Reserve Bank of India over the terms of the agreement, senior bank officials said.
CEOs of a few banks, led by
State Bank of India (SBI), would sign the agreement, which would bind minority lenders in accepting a resolution plan of the majority of
contrary to its February 12 circular on resolution of bad debts, which said all lenders in a consortium should approve and implement a
resolution plan within 180 days of default
Even if one creditor disagrees, the loan should be referred to the bankruptcy court.
Inter-creditor agreement (ICA), on the other hand,
talks about binding minority lenders in implementing a proposal if 66% lenders agree to it
earlier.
Last week, a team of senior bank officials, led by SBI, had met RBI officials with regards to concerns raised by the RBI nominee on
the boards of various banks
Senior officials said that even as there is pressure from the finance ministry to quickly execute the inter-creditor agreement, all lenders
are not expected to sign the deal on Monday.
A few would sign it on Monday and the rest would join in the following days after they receive
approval from their boards, they said.
Interestingly, there are no foreign banks in the list of 50-odd lenders that are set to sign the
This implies that a foreign bank could drag a defaulting company to bankruptcy court even if all members of the ICA agree to a plan
Some of the small banks have objected to certain terms in the ICA, such as dissenting creditors could sell their loan at a discount of 15%
of the liquidation value to other lenders or buy the entire loan at 125% of the resolution plan agreed to by other lenders
The other option with a dissenting creditor is to sell their loans to any person at a price mutually arrived at between the dissenting
The agreement also has a standstill clause wherein all lenders are barred from enforcing any legal action against the borrower for recovery
During the standstill period, lenders are also barred from transferring or assigning their loan to any other person except a bank or finance
