“If not all banks are on the same side of loan restructuring, the process would be delayed. This should be avoided. In this context (SBI president) Rajnish Kumar proposed an “inter-creditor omnibus agreement” (ICA), said a source in the publication. Junior lenders should pay attention to how and when interest payments scheduled an interest rate refers to the amount a lender has charged a borrower for each form of bonds, usually expressed as a percentage of the principal. the State policy committee should also ensure that there are no upsetting blockages put in place by the main lender in the event of a borrower defaulting. Therefore, a junior lender must negotiate treatments such as limiting the number of blockages in the event of defaults, protection to speed up debt and perfect corrective measures, and a clear guideline for the start of a blockade. However, in most unresolved cases, the solution schedule expired in January 2020. As a result, banks must make additional provisions of 20% during the March quarter for cases where the 210-day settlement period expired before March 1. According to the RBI circular of 7 June 2019, banks had to make additional provisions of 20% in cases where the settlement could not be reached for 210 days after the signing of the Inter-creditor agreement. By the middle of next week, operating guidelines for major banks and the steering committee will be published as part of the Inter-Creditor Agreement (ICA), said C Venkat Nageswar, Deputy Managing Director (Global Markets), State Bank of India.
In such a scenario, the government authority may act as a junior lender, the financial (s) as a priority lender and the company (Y) as a borrower. Since the company provides credit to the two financiers with the same property, the senior creditor will in any event want to enter into an intercreditor agreement with the government authority in order to protect its interests. Junior lenders should be careful when evaluating an intercredit file before participating. One way to achieve this goal is to negotiate a fair edge and develop achievable plans. However, if efforts to set such conditions are unsuccessful, it is advisable that the junior lender waive the agreement or seek other options. Banks that oppose the resolution plan have the option of selling their most stressed loans at a discount to a company or buying back loans from all other lenders for a premium. “The aim is to use this agreement between creditors to facilitate faster resolution of the most stressed assets,” said Sunil Mehta, non-executive chairman of the National Bank of Punjab. “One of the most important issues was the consensus among credit banks on a common resolution plan.” According to VG Kannan, Chairman of the Board of Directors of the Indian Banks Association, the ICA was executed by 24 lenders, mainly those who obtained their approval from the board of directors. SBI, PNB and LIC were among those who signed the agreement on Monday. “It is expected that other lenders will execute the ICA shortly after the respective boards approve,” he said.
The interbank agreement plays a central role in the right to pledge. It is therefore essential that both lenders establish a solid foundation for their rights and priorities in the event of a borrower`s financial capacity failure and late payment.