Loan Commitment Agreement for India

Loan Commitment Agreement Template for India

A legally binding agreement governed by Indian law that formalizes a lender's commitment to provide a specified loan facility to a borrower under defined terms and conditions. The agreement details the facility amount, purpose, availability period, interest rates, fees, drawdown mechanics, conditions precedent, representations, warranties, covenants, and events of default. It incorporates requirements under Indian banking regulations, including RBI guidelines, and provides mechanisms for enforcement under Indian contract law. The document serves as the primary framework for the lending relationship and includes provisions for security, compliance requirements, and remedies available under Indian jurisdiction.

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What is a Loan Commitment Agreement?

The Loan Commitment Agreement is a crucial document in Indian banking and finance practice, used when a financial institution agrees to make a loan facility available to a borrower. It serves as a formal commitment by the lender to provide funding, subject to specified conditions and terms. The agreement must comply with Indian banking regulations, particularly RBI guidelines, the Banking Regulation Act, and the Indian Contract Act. It typically precedes the actual loan disbursement and outlines all essential elements of the lending arrangement, including facility details, conditions precedent, security requirements, and borrower obligations. This document is particularly important in commercial lending as it provides certainty to borrowers regarding funding availability while protecting lenders through clearly defined terms and conditions.

What sections should be included in a Loan Commitment Agreement?

1. Parties: Identifies and defines the lender, borrower, and any guarantors with their full legal names and addresses

2. Background: Describes the context of the loan commitment, including the borrower's request and lender's agreement to provide the facility

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

4. Facility Amount and Purpose: Specifies the committed loan amount and permitted purposes for which the loan may be used

5. Availability Period: Defines the period during which the borrower can draw down the loan

6. Conditions Precedent: Lists the conditions that must be satisfied before the facility becomes available

7. Interest and Fees: Details the interest rate, commitment fees, and other charges applicable to the facility

8. Drawdown Mechanics: Specifies the process and requirements for requesting and receiving loan disbursements

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

10. Covenants: Sets out the borrower's ongoing obligations, including financial covenants and reporting requirements

11. Events of Default: Lists circumstances that would constitute default and trigger remedial actions

12. Remedies: Outlines the lender's rights and remedies upon occurrence of an event of default

13. Notices: Specifies how formal communications between parties should be made

14. Governing Law and Jurisdiction: Establishes Indian law as governing law and specifies jurisdiction for dispute resolution

What sections are optional to include in a Loan Commitment Agreement?

1. Security: Required when the loan commitment is to be secured by collateral or guarantees

2. Syndication Provisions: Included when the facility may be syndicated to multiple lenders

3. Assignment and Transfer: Detailed provisions for when either party may want to transfer their rights or obligations

4. Force Majeure: Provisions dealing with unforeseen circumstances preventing performance

5. Increased Costs: Provisions dealing with changes in law or regulations affecting the lender's costs

6. Market Disruption: Provisions addressing situations where interest rate benchmarks become unavailable

7. Tax Provisions: Detailed tax-related provisions when cross-border elements exist

8. Currency Provisions: Required when the facility involves multiple currencies

What schedules should be included in a Loan Commitment Agreement?

1. Schedule 1 - Facility Terms: Detailed commercial terms including facility amount, interest rates, fees, and repayment schedule

2. Schedule 2 - Conditions Precedent Documents: List of all documents and evidence required before facility availability

3. Schedule 3 - Form of Drawdown Request: Template for the borrower to request loan disbursements

4. Schedule 4 - Form of Compliance Certificate: Template for periodic confirmation of covenant compliance

5. Schedule 5 - Security Documents: List and copies of security documents if the facility is secured

6. Schedule 6 - Financial Covenants Calculations: Detailed methodology for calculating financial covenants

7. Appendix A - KYC Requirements: List of required know-your-customer documentation

8. Appendix B - Fee Schedule: Detailed breakdown of all applicable fees and charges

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 and Financial Services

Real Estate and Construction

Manufacturing

Infrastructure

Technology and Software

Healthcare

Retail and Consumer Goods

Energy and Utilities

Transportation and Logistics

Agriculture and Agribusiness

Education

Hospitality

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Credit

Corporate Banking

Business Development

Operations

Company Secretarial

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Legal Counsel

Corporate Lawyer

Risk Manager

Credit Manager

Relationship Manager

Compliance Officer

Banking Officer

Loan Officer

Financial Controller

Company Secretary

Business Development Manager

Financial Analyst

Industries
Indian Contract Act, 1872: Fundamental law governing contract formation, validity, and enforcement. Essential for ensuring the loan commitment agreement meets basic contractual requirements including offer, acceptance, consideration, and capacity.
Reserve Bank of India Act, 1934: Provides regulatory framework for banking operations and monetary policy. Relevant for interest rate regulations and banking operations guidelines.
Banking Regulation Act, 1949: Regulates banking companies and operations. Important for ensuring compliance with banking norms and lending procedures.
Registration Act, 1908: Governs the registration of documents. Relevant if the loan agreement needs to be registered, especially if it involves immovable property as security.
Indian Stamp Act, 1899: Determines the stamp duty payable on loan agreements and related documents. Essential for ensuring proper stamping of the agreement.
Recovery of Debts Due to Banks and Financial Institutions Act, 1993: Provides mechanism for recovery of debts due to banks and financial institutions. Important for enforcement provisions in the agreement.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): Relevant if the loan involves security interests and provides framework for enforcement of security interests.
Prevention of Money Laundering Act, 2002: Ensures compliance with anti-money laundering regulations in financial transactions. Relevant for KYC requirements and transaction monitoring.
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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