A Collateral Account Agreement is essential in secured financing transactions where control over bank accounts forms part of the security package. This document is commonly used in project finance, corporate lending, and structured finance transactions in India where lenders require security over the borrower's cash flows and bank accounts. The agreement complies with Indian banking and security laws, particularly the Banking Regulation Act, 1949 and SARFAESI Act, 2002. It details the establishment of secured accounts, control mechanisms, operational procedures, and enforcement rights. The document is crucial for protecting lenders' interests by ensuring control over cash collateral while allowing borrowers to conduct ordinary course operations under specified conditions. It addresses requirements under Indian law for creating and perfecting security interests over bank accounts and includes necessary provisions for enforcement and regulatory compliance.

1. Parties: Identifies the account holder, the secured party (typically a lender or security trustee), and the account bank

2. Background: Describes the underlying transaction necessitating the collateral arrangement and the purpose of the agreement

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation principles

4. Account Establishment and Operation: Details the establishment of the collateral account(s) and operational procedures

5. Security Interest: Creates and defines the security interest over the account and its contents

6. Account Bank Rights and Obligations: Specifies the duties, rights, and protections of the account bank

7. Control and Access Rights: Details who can access and operate the account under different circumstances

8. Representations and Warranties: Contains statements of fact and assurances from the parties

9. Covenants: Ongoing obligations of the account holder regarding the maintenance and use of the account

10. Events of Default: Lists circumstances that trigger enforcement rights

11. Enforcement Rights: Details the rights and remedies upon default, compliant with Indian law

12. Payments and Withdrawals: Specifies permitted payments, withdrawal mechanisms, and any restrictions

13. Fees and Expenses: Details all fees, costs, and expenses related to the account and their allocation

14. Miscellaneous: Standard boilerplate provisions including notices, amendments, governing law, etc.