Drafting a Bank Loan Agreement

Saptaparni Raha
Nov 15, 2022
2 min read

Written by Saptaparni Raha, Lawyer

Rajat wants to take a loan from a bank. His friend Raj is an employee of the same bank. They agree to establish a legal relationship between the borrower and the lender.

Introduction:

A bank loan agreement helps the borrower and lender to establish a contractual relationship between them where the borrower agrees to pay the sum and abide by the terms and conditions of the agreement.

Purpose of the Loan Agreement:

The purpose of the agreement is to provide the terms and conditions of the loan that needs to be satisfied before drawing the loan.

Important Clauses for the Agreement:

The first clause is that the borrower shall provide certain conditions before drawing the loan. After that, the lender will agree to the conditions to repay the loan.
The borrower then needs to repay the loan with all indebtedness.
There shall be an interest rate of six per cent of the principal amount of the loan outstanding.
The borrower has the right to prepay the loan of the whole or part of the loan at any time. The repayment of the loan by the borrower is secured by a guarantee from the guarantor.
The borrower shall acknowledge the assets he owns and conduct his business.
All assets need to be insured by the borrower against all risks.
If there is an occurrence of an event of default, the lender may write a notice by mentioning the indebtedness.
The borrower is entitled to pay all costs, expenses, and fees on a full indemnity basis to the lender.
The entire amount shall be paid in Indian rupees.
Any charge, or mortgage may not be assigned by the borrower without any prior written notice. The lender is entitled to assign or transfer any of its rights with the prior written consent of the borrower.
The parties can amend or modify the agreement in whole or part at any time during the period of the agreement.

Conclusion:

The loan agreement is important when the borrower does not return the money within the stipulated time. Both parties need to sign this agreement to enforce it before a court of law.

References:

Pooja Wagh. (2021). Everything to know about single bank loan agreement. retrieved from Everything to know about single bank loan agreement - iPleaders