Topic of the Day – Inter Creditor Agreement (ICA)

UPSC Exam Preparation: Topic of the Day – Inter Creditor Agreement (ICA)

Inter Creditor Agreement (ICA) is an agreement among banks that have dues from a borrower in stress. The pact authorizes the lead bank (with the highest exposure) to formulate a resolution plan that could be executed in a time-bound manner.

ICA is a topic under economy section of the IAS exam syllabus. It is also a part of government schemes which are an important segment of  UPSC preparation.


  • ICA is a part of Project ‘Sashakt’ of the Government.
  • The Inter-Creditor Agreement was framed under the aegis of the Indian Banks’ Association following the recommendations of the Sunil Mehta Committee on stressed asset resolution.
  • The lead bank’s resolution plan for operation turnaround of assets will be provided to all the lenders for their approval.
  • The overseeing committee would receive each of the resolution plans submitted by lead lenders.
  • Approval of majority lenders is necessary for the decision making under the ICA framework, i.e, to implement the resolution plan, approval is required from the lenders with 66% share in aggregate exposure.
  • Once the resolution plan receives a majority vote, it shall be binding on all the lenders that are a party to the agreement.
  • The Banks opposing to the resolution plan will be given an exit option i.e, option to sell off their stressed loan to a company at a discount or buy out the loan to that entity from all the lenders at a premium.
  • The resolution plan formulated under ICA must be in compliance with the RBI norms and all the other applicable guidelines and laws.
  • The plan would be implemented in a time-bound manner before bankruptcy proceedings kick in, as was the mandate of the Reserve Bank.


The ICA is applicable to all corporate borrowers who have availed loans for an amount of Rs. 50 crore or more under consortium lending / multiple banking arrangements.


Read more ‘Topic of the Day’ and stay ahead of your competition. 


Also Read: