What is an inter-creditor agreement (ICA)?

An inter-creditor agreement, or ICA, is what banks ask bondholders to sign when a borrower goes bad and everyone wants one resolution rather than a race to the assets. For listed debt securities the debenture trustee signs on behalf of holders, and SEBI attaches conditions to that signature, including an exit right and a hard outer time limit. This guide covers where the ICA comes from, what the trustee must secure before signing, and the 180 and 365 day clocks. It is not investment advice.

Where does the inter-creditor agreement come from?

From banking regulation, not securities regulation. Paragraph 3.1 of Chapter X of SEBI's Master Circular for Debenture Trustees, SEBI/HO/DDHS-PoD-1/P/CIR/2025/117 dated August 13, 2025, records that the Reserve Bank of India issued the Prudential Framework for Resolution of Stressed Assets Directions 2019 by circular dated June 7, 2019. That framework specifies a resolution mechanism for lenders, defined there as scheduled commercial banks, all-India term financial institutions, small finance banks, systemically important non-deposit taking NBFCs and deposit taking NBFCs.

Bondholders are not on that list, but they are financial creditors of the same borrower. So the framework reaches them indirectly: the lenders who are on the list approach the bondholders to sign the agreement on the terms the RBI framework sets.

That is the structural tension SEBI is regulating. A resolution plan negotiated among banks can restructure or roll over listed debt securities, and rolling over listed debt is separately governed by SEBI rules. Regulation 59 of the LODR Regulations requires the consent of the requisite majority of investors for material modification in the structure of debt securities. Regulation 39 of the NCS Regulations, applicable to public issues, requires 15 days notice for a roll-over and approval from not less than three-fourths of holders by value.

What must a debenture trustee secure before signing?

Approval from holders, obtained through positive consent. The default notice under paragraph 3.3.2(b) carries a provision for positive consent for signing the ICA, so holders who do not respond are not counted as agreeing. The threshold under paragraph 3.3.6 is approval of not less than 75 percent of holders by value of outstanding debt and 60 percent by number, at the ISIN level.

The parent regulation states the requirement directly. Regulation 15(7) of the SEBI (Debenture Trustees) Regulations, 1993 provides that, subject to the approval of the debenture holders and conditions specified by SEBI, the debenture trustee may on behalf of the holders enter into inter-creditor agreements provided under the framework specified by the Reserve Bank of India.

Under paragraph 3.3.5(d) the trustee may form a representative committee of holders to participate in the ICA, rather than participating alone.

What conditions does SEBI attach?

Four, set out in paragraph 4.1, and three of them are exit rights.

Paragraph 4.2 makes those enforceable rather than aspirational. The trustee must ensure the conditions in paragraphs 4.1(b), (c) and (d) are suitably incorporated in the ICA itself, before signing it. An exit right that is not written into the agreement does not exist when it is needed.

What are the 180 and 365 day limits?

Two different clocks. The 180 days runs from the end of the review period and is the deadline for finalising the resolution plan. If finalisation extends beyond it, the trustee may consent to an extension, but only subject to the approval of the investors regarding the total timeline. The total timeline shall not exceed 365 days from the date of commencement of the review period.

Read the two numbers against different start points. The 180 days starts at the end of the review period. The 365 day ceiling starts at the commencement of it. They are not the same date, so the extension available in practice is not simply 185 days.

Related reading

The trigger that starts the consent process is covered in what is an event of default on a debt security, and the notice and voting mechanics are in debenture holder consent for enforcement of security. What happens to a bond that stays unpaid past maturity is covered in what happens to a defaulted bond after maturity, and the full obligation set the trustee is working under is in duties of a debenture trustee.

An inter-creditor agreement is a resolution mechanism with defined entry conditions, exit rights and time limits, and a debenture trustee can only join one with holder approval. Flock reports what issuers and trustees disclose, with the source and the date attached. It is not investment advice.