Limited Recourse Loan Agreement for India

Limited Recourse Loan Agreement Template for India

A Limited Recourse Loan Agreement under Indian law is a specialized financing document that establishes the terms and conditions for a loan where the lender's recourse is restricted to specific assets or cash flows of the project, rather than the borrower's general assets. The agreement, governed by Indian contract law and financial regulations, details the loan facility, security package, limited recourse provisions, and project-specific requirements. It incorporates key provisions for project finance transactions while ensuring compliance with Indian banking regulations, securities laws, and enforcement mechanisms under the SARFAESI Act and other relevant legislation.

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What is a Limited Recourse Loan Agreement?

The Limited Recourse Loan Agreement is a crucial document in project finance and structured finance transactions in India, typically used for large-scale infrastructure, energy, and industrial projects. This agreement is appropriate when lenders agree to look primarily to the project's assets and cash flows for repayment, rather than the sponsor's other assets. The document establishes the precise scope of limited recourse, details the security package, and outlines the specific circumstances under which lenders can enforce their rights. It must comply with Indian banking regulations, the SARFAESI Act, and other relevant legislation while incorporating international best practices in project finance. The agreement is particularly relevant for projects where the borrower is a special purpose vehicle (SPV) and the financing structure relies on project revenues for debt service.

What sections should be included in a Limited Recourse Loan Agreement?

1. Parties: Identification of the lender(s), borrower(s), and any other relevant parties to the agreement

2. Background: Context of the transaction, purpose of the loan, and basic transaction structure

3. Definitions and Interpretation: Definitions of key terms and interpretation rules for the agreement

4. The Facility: Details of the loan facility, including amount, purpose, and availability

5. Conditions Precedent: Conditions that must be satisfied before drawdown

6. Drawdown: Procedures and requirements for utilizing the loan facility

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

8. Repayment and Prepayment: Terms for scheduled repayment and voluntary/mandatory prepayment

9. Security: Description of security package and security creation requirements

10. Limited Recourse Provisions: Core provisions limiting lender's recourse to specified assets/cash flows

11. Representations and Warranties: Standard and transaction-specific representations and warranties

12. Covenants: Positive and negative undertakings of the borrower

13. Events of Default: Circumstances constituting default and consequences

14. Payments: Payment mechanics, currency, and tax provisions

15. Changes to Parties: Assignment and transfer provisions

16. Administration: Notice provisions and administrative matters

17. Governing Law and Jurisdiction: Choice of law and jurisdiction provisions

What sections are optional to include in a Limited Recourse Loan Agreement?

1. Facility Agent Provisions: Required for syndicated facilities to detail the agent's role and responsibilities

2. Security Agent Provisions: Required when security is held through a security trustee/agent

3. Account Bank Provisions: Required when project accounts are maintained with a designated account bank

4. Intercreditor Provisions: Required when multiple creditors are involved with different priorities

5. Cash Waterfall: Required when there is a specific order of priority for application of project revenues

6. Insurance Provisions: Detailed insurance requirements when specific insurance coverage is critical to the security package

7. Step-in Rights: Required when lenders need rights to take control of project contracts

8. Hedging Obligations: Required when hedging is part of the transaction structure

What schedules should be included in a Limited Recourse Loan Agreement?

1. Form of Drawdown Request: Standard form for requesting loan disbursements

2. Conditions Precedent Documents: Detailed list of required conditions precedent documents

3. Security Documents: List and copies of all security documents

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

5. Project Accounts: Details of required project accounts and operating procedures

6. Form of Transfer Certificate: Standard form for transferring loan participations

7. Financial Covenants: Detailed financial covenant calculations and requirements

8. Permitted Security: List of pre-approved security interests

9. Form of Compliance Certificate: Standard form for periodic compliance certification

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

Infrastructure

Energy

Renewable Energy

Real Estate

Mining

Oil & Gas

Transportation

Power Generation

Telecommunications

Industrial Development

Waste Management

Water Treatment

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Project Finance

Corporate Banking

Credit

Investment Banking

Operations

Relevant Roles

Chief Financial Officer

Finance Director

Project Finance Manager

Legal Counsel

Corporate Lawyer

Finance Manager

Project Manager

Risk Manager

Treasury Manager

Compliance Officer

Investment Banking Director

Project Finance Associate

Contract Manager

Banking Relationship Manager

Credit Risk Officer

Industries
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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