Banking · Stressed Assets and RBI Prudential Framework
A lead arranger bank faces dual stress: a major greenfield syndicated project loan encounters cost overruns due to a tribunal stop-work order, while the bank simultaneously faces temporary retail liquidity pressure. Under RBI's Prudential Framework for Resolution of Stressed Assets, how can the bank legally enforce a debt restructuring plan against dissenting syndicate lenders while managing its liquidity?
- 1Cancel the loan syndicate unilaterally and seek a sovereign guarantee for the entire exposure.
- 2Automatically classify the account as an NPA without seeking restructuring approval under ICA.
- 3Enforce the plan if approved by at least 75% of lenders by value and 60% by number under the Inter-Creditor Agreement (ICA), using RBI liquidity facilities (LAF/MSF) for short-term liquidity.✓
- 4Use remaining liquidity to fund overruns directly and ignore retail withdrawals as DICGC covers all deposits.
Correct answer
Enforce the plan if approved by at least 75% of lenders by value and 60% by number under the Inter-Creditor Agreement (ICA), using RBI liquidity facilities (LAF/MSF) for short-term liquidity.
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