Indian Banks' Association (IBA) chief executive Sunil Mehta has said that banks are working together in removing hurdles and speeding up the process of execution of inter-creditor agreement (ICA) in order to ensure faster resolution of bad assets amid COVID-19 pandemic. He said a draft on the same has been already given to banks for their suggestions. As per the RBI, in cases where a resolution has to be implemented, all lenders will have to enter ICA within a review period. The ICA shall provide that any decision agreed by lenders representing 75 percent by value of total outstanding credit facilities (fund-based as well as non-fund based) and 60 percent of lenders by number shall be binding upon all the lenders.
Mehta said ‘the point is we want to go for a system where bottlenecks in execution of the ICA are removed. The moment threshold levels reached 60 percent by number and 75 percent by value, as per the RBI regulatory guidelines, the ICA can be executed immediately, maybe, within a few weeks. The outer limit is one month’. He also said that this ICA should be binding on the remaining lenders who may not have opted for that resolution but since they are part of that consortium or multiple lending framework, they have to abide by that resolution framework.
He further said the IBA has prepared a rough draft on ICA which the member bank can accept and it has already been circulated to the member banks for their suggestions. He also said ‘it is already work in progress and a larger consensus has already been achieved and I hope we will be able to pave a way for quicker resolution of bad loans’. Talking about the recent financial parameters required for one-time loan recast, he said these ratios are not benchmarks for becoming eligible for restructuring but are benchmarks for eligibility of a restructuring to pass through.