Credit Facility Agreement for India

Credit Facility Agreement Template for India

A Credit Facility Agreement governed by Indian law is a comprehensive legal document that establishes the terms and conditions under which a lender extends credit to a borrower. The agreement complies with Indian banking regulations, particularly the Banking Regulation Act, 1949, and RBI guidelines. It details the facility amount, interest rates, repayment terms, security arrangements, representations and warranties, covenants, and events of default. The document incorporates specific Indian legal requirements, including stamp duty compliance and registration requirements where applicable, while providing mechanisms for enforcement under Indian law through various channels including the Debt Recovery Tribunals and SARFAESI Act provisions.

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What is a Credit Facility Agreement?

Credit Facility Agreements are fundamental documents in Indian corporate lending, used when a financial institution extends credit to a borrower. These agreements are essential for both secured and unsecured lending transactions in India, ranging from simple bilateral facilities to complex syndicated arrangements. The document must comply with Indian banking regulations, RBI guidelines, and other relevant legislation such as the Banking Regulation Act, 1949, and SARFAESI Act. It typically includes comprehensive provisions on facility terms, drawdown mechanics, security arrangements, representations, covenants, and enforcement mechanisms. Credit Facility Agreements are particularly important in the Indian context due to specific regulatory requirements, mandatory provisions, and the need to ensure enforceability through local courts and tribunals.

What sections should be included in a Credit Facility Agreement?

1. Parties: Identifies the lender(s) and borrower(s), including their registered addresses and company details

2. Background: Sets out the context of the facility and purpose of the loan

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

4. The Facility: Details of the credit facility including amount, type, and purpose

5. Conditions Precedent: Conditions that must be satisfied before the facility becomes available

6. Drawdown: Procedures and requirements for drawing down the facility

7. Interest: Interest rate, calculation method, and payment provisions

8. Repayment: Terms and schedule for repayment of the facility

9. Representations and Warranties: Statements of fact and assurances given by the borrower

10. Covenants: Positive and negative obligations of the borrower during the facility period

11. Events of Default: Circumstances that constitute default and consequences thereof

12. Security: Overview of security arrangements for the facility

13. Payments: Payment mechanics, timing, and currency provisions

14. Costs and Expenses: Allocation of costs related to the facility and its maintenance

15. Notices: Communication procedures between parties

16. Assignment and Transfer: Rights and restrictions regarding transfer of rights and obligations

17. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction

18. Counterparts: Provisions for execution in multiple counterparts

What sections are optional to include in a Credit Facility Agreement?

1. Syndication Provisions: Required for syndicated facilities involving multiple lenders

2. Increased Costs: Provisions dealing with regulatory changes affecting the lender's costs

3. Market Disruption: Provisions for handling market disruption events affecting interest rates

4. Tax Gross-Up and Indemnities: Detailed tax provisions if cross-border elements or specific tax concerns exist

5. Currency Provisions: Required for facilities involving foreign currency or multiple currencies

6. Insurance: Detailed insurance requirements if specific insurance coverage is required

7. Security Trustee Provisions: Required when security is held by a security trustee

8. Guarantee Provisions: Required when the facility is supported by guarantees

What schedules should be included in a Credit Facility Agreement?

1. Facility Particulars: Detailed terms of the facility including amounts, interest rates, and margins

2. Conditions Precedent Documents: List of documents required before facility availability

3. Form of Drawdown Notice: Template for borrower to request drawdown

4. Repayment Schedule: Detailed schedule of repayment dates and amounts

5. Security Documents: List and copies of security documents

6. Form of Compliance Certificate: Template for periodic compliance certification

7. Permitted Security Interests: List of security interests permitted under the facility

8. Form of Transfer Certificate: Template for transfer of facility participation

9. Financial Covenants: Detailed financial covenants and calculation methodologies

10. Contact Details: Detailed contact information for all parties

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

India

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Banking

Financial Services

Corporate Lending

Investment Banking

Commercial Banking

Private Equity

Industrial Manufacturing

Real Estate

Infrastructure

Healthcare

Technology

Retail

Hospitality

Energy

Agriculture

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Credit

Corporate Finance

Banking Operations

Company Secretarial

Documentation

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Legal Counsel

Corporate Lawyer

Relationship Manager

Credit Officer

Risk Manager

Compliance Officer

Banking Officer

Corporate Finance Manager

Financial Controller

Company Secretary

Transaction Manager

Loan Officer

Credit Analyst

Legal Manager

Banking Operations Manager

Industries
Indian Contract Act, 1872: Fundamental law governing contract formation, validity, and enforcement in India. Essential for basic contractual provisions, capacity to contract, and remedies for breach.
Banking Regulation Act, 1949: Regulates banking companies and banking operations in India. Relevant for lending activities, interest rates, and general banking compliance requirements.
Reserve Bank of India Act, 1934: Establishes RBI's authority and its power to issue guidelines on lending, interest rates, and credit policy. Important for compliance with current RBI directives on credit facilities.
Registration Act, 1908: Governs the registration of documents. Relevant if the credit facility agreement needs to be registered, especially if coupled with security creation.
Stamp Act (Central and State): Determines the stamp duty payable on credit agreements. Varies by state and type of facility.
Recovery of Debts Due to Banks and Financial Institutions Act, 1993: Provides for establishment of Debt Recovery Tribunals for expeditious adjudication of disputes related to bank debts.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI): Important for enforcement of security interests and recovery procedures for secured lending.
Information Technology Act, 2000: Relevant for electronic execution of agreements and digital signatures, if the agreement is to be executed electronically.
Foreign Exchange Management Act, 1999: Applicable if the credit facility involves foreign currency or cross-border elements.
Prevention of Money Laundering Act, 2002: Relevant for KYC requirements and anti-money laundering compliance in lending transactions.
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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