Inter-creditor agreement: Legal issues may affect operations, say experts

The decision makers under BLRA may have to be given indemnity against any investigation

Barely days after 24 public sector banks signed an inter-creditor agreement (ICA), as part of recently initiated bank-led resolution approach (BLRA) to deal with distressed assets, there appears to be resistance to the move from some asset reconstruction companies and private banks. Bankers and legal experts also anticipate regulatory challenges in making this new mechanism work on the ground.

The ICA is the key to the success of the BLRA mechanism. It ensures the presence of a binding decision-making process for arriving at and implementing resolution plans for distressed borrowers. “The agreement binds only those who sign it,” says Sonali Mahapatra,