Line Of Credit Agreement for India

Line Of Credit Agreement Template for India

A Line of Credit Agreement under Indian law is a comprehensive financial contract that establishes a flexible borrowing arrangement between a lender and borrower. It enables the borrower to draw funds up to a predetermined limit, repay, and reborrow during the facility period. The agreement is governed by Indian banking and contract laws, particularly the Banking Regulation Act 1949 and RBI guidelines. It details the credit limit, interest rates, drawdown mechanics, repayment terms, security arrangements (if any), and the rights and obligations of all parties involved. The document must comply with Indian stamp duty requirements and registration laws where applicable.

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What is a Line Of Credit Agreement?

A Line of Credit Agreement is essential for businesses and individuals seeking flexible access to funds in India. This document establishes a commitment from a lender to provide credit up to a specified limit, allowing the borrower to draw down funds as needed, repay, and reborrow within the facility period. The agreement must comply with Indian banking regulations, RBI guidelines, and contract law. It's particularly useful for managing working capital, seasonal cash flow variations, or project-based funding needs. The document includes comprehensive details about interest calculation, security arrangements, conditions for drawdown, events of default, and remedy provisions. It's a crucial instrument in Indian commercial lending, requiring careful consideration of both regulatory compliance and practical operational needs.

What sections should be included in a Line Of Credit Agreement?

1. Parties: Identification of the lender(s) and borrower(s) with complete details

2. Background: Recitals explaining the context and purpose of the credit facility

3. Definitions and Interpretation: Definitions of terms used in the agreement and rules of interpretation

4. The Facility: Core terms of the credit facility including amount, purpose, and availability period

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

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

7. Interest and Fees: Interest rates, calculation methods, and applicable fees

8. Repayment Terms: Terms and schedule for repayment of drawn amounts

9. Borrower Representations: Borrower's warranties and representations

10. Borrower Covenants: Positive and negative covenants of the borrower

11. Events of Default: Circumstances constituting default and consequences

12. Rights and Remedies: Lender's rights and remedies upon default

13. Changes to Parties: Provisions regarding assignment and transfer rights

14. Notices: Communication procedures between parties

15. General Provisions: Boilerplate clauses including governing law, jurisdiction, etc.

What sections are optional to include in a Line Of Credit Agreement?

1. Security Provisions: Required when the facility is secured by collateral, detailing the security structure and enforcement rights

2. Guarantee Provisions: Needed when third-party guarantors are involved in securing the facility

3. Syndication Provisions: Required for facilities involving multiple lenders or potential syndication

4. Insurance Requirements: Detailed insurance obligations when specific insurance coverage is required for the facility

5. Financial Covenants: Specific financial maintenance covenants when required for the borrower

6. Regulatory Compliance: Special compliance requirements for regulated industries or specific business sectors

7. Currency Provisions: Required for facilities involving multiple currencies or foreign exchange considerations

8. Special Drawdown Conditions: For facilities with specific or unusual drawdown requirements

What schedules should be included in a Line Of Credit Agreement?

1. Facility Terms Schedule: Detailed terms of the facility including limits, sub-limits, and pricing

2. Conditions Precedent Schedule: List of all documents and conditions required before first drawdown

3. Security Details Schedule: Details of all security/collateral provided for the facility

4. Form of Drawdown Notice: Template for borrower to request drawdown under the facility

5. Repayment Schedule: Detailed repayment terms and dates if applicable

6. Fee Schedule: Detailed breakdown of all applicable fees and charges

7. Compliance Certificate: Form of periodic compliance certificate to be submitted by borrower

8. Financial Covenants Schedule: Detailed financial covenants and calculation methodologies

9. Contact Details Schedule: Contact information for all relevant parties and representatives

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

Manufacturing

Retail

Real Estate

Information Technology

Healthcare

Construction

Agriculture

Logistics & Transportation

Energy & Utilities

Telecommunications

Hospitality

Education

Professional Services

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Credit

Operations

Corporate Banking

Commercial Banking

Documentation

Relationship Management

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Financial Controller

Credit Manager

Risk Manager

Legal Counsel

Company Secretary

Relationship Manager

Credit Analyst

Compliance Officer

Managing Director

Operations Manager

Account Manager

Corporate Banking Officer

Industries
Indian Contract Act, 1872: Fundamental law governing contract formation, validity, performance, and enforcement in India. Essential for basic structure and terms of the credit agreement.
Banking Regulation Act, 1949: Regulates banking operations in India, including lending activities and credit facilities. Sets out key compliance requirements for credit arrangements.
Reserve Bank of India Act, 1934: Provides framework for RBI's regulatory authority over banking and monetary policy, including guidelines on interest rates and credit control.
Registration Act, 1908: If the agreement involves immovable property as security, registration requirements must be considered.
Indian Stamp Act, 1899: Determines the stamp duty payable on credit agreements and related security documents.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): Relevant for enforcement of security interests and recovery procedures in case of default.
Information Technology Act, 2000: Applicable if the agreement involves digital signatures or electronic execution.
Recovery of Debts Due to Banks and Financial Institutions Act, 1993: Provides for establishment of debt recovery tribunals and procedures for debt recovery.
RBI Master Circulars on Credit Facilities: Contains specific guidelines and regulations for different types of credit facilities, including documentation and operational requirements.
Consumer Protection Act, 2019: Applicable if the borrower qualifies as a consumer, providing additional protection and remedies.
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