RBI In Talks With SEBI, IRDAI To Make AMCs, Insurers Part Of Inter-Creditor Agreement
To further ease the resolution of stressed assets, the Reserve Bank of India is in discussions with its counterparts Securities Exchange Board of India and the Insurance Regulatory and Development Authority to allow asset management companies and insurers to become part of the Inter-Creditor Agreement, something that is mandatory for resolving stressed assets.
In the revised circular on the framework for resolution of stressed assets, issued on June 7, the RBI made signing of an inter-creditor agreement by all lenders mandatory, to arrive at a majority decision-making criteria for resolving stressed assets.
“In the June 7 circular, we have made ICA mandatory. But it has been learnt that while dealing individual cases, banks have found that a good portion of the outstanding of individual corporates or entities are from insurance companies and mutual funds,” governor Shaktikanta Das told reporters post the policy announcement.
But the present rules do not consider AMCs and insurance companies as financial creditors; therefore the planned changes.
He said it is necessary to look at the whole situation, liability of the entity comprehensively and not only from the bankers’ eye.
Das said RBI had inter-regulator meeting at a very senior levels from senior members from the SEBI and IRDAI.
“IRDAI has taken a decision to enable the insurance companies to be part of the ICA. Our discussion with the other regulator is ongoing,” the governor said.
Deputy governor NS Vishwanathan said RBI does not have a problem if the ICA provides different treatment for different types of creditors.
In the June 7 circular, RBI said in case a borrower is reported to be in default by one lender, others will have review of the borrower account within thirty days from such default, which is called review period.
During the review period of thirty days, lenders may decide on the resolution strategy, including the nature of the resolution plan and an approach for implementation of the resolution plan.
In cases where resolution plan is to be implemented, all lenders will enter into ICA, during the review period, to provide for ground rules for finalisation and implementation of the resolution plan in respect of borrowers with credit facilities from more than one lender.
The ICA will provide that any decision agreed by lenders representing 75 percent by value of total outstanding credit (both fund-based and non-fund based) and 60 percent of lenders by number shall be binding upon all the lenders.