TERM LOANS PROCEDURAL REQUIREMENTS

Obligations of assistance

The project should have the following pre-requisites for financial assistance - where necessary, it has obtained LOI / industrial licence - it has obtained approval for foreign technical / financial collaboration - it has secured clearance for import of plant and equipment

- it has selected site, got detailed project report and market survey - it has obtained necessary approvals / licences / leases for mining / quarrying - it has obtained approval for required power

Procedure - Apply to AFI in their prescribed formats - AFIs will process, screen and decide - To speed up, AFIs have committees at various levels

- Sanction is communicated by way of LOI with main terms and conditions - Standard form of loan agreement is also sent - Applicant to confirm by signing and returning the LOI

Disbursement

- Acceptance of LOI - Execution of documents - Bringing sufficient promoters’ contribution - Creation of security - Tying arrangement for financial assistance from other sources - Complying with special conditions as may be stipulated by AFIs at the time of grant of financial assistance

- Implementation of project as per schedule - Submission of periodical statements relating to expenditure incurred and the expenditure proposed to be incurred under various heads - Insuring the assets acquired - Satisfying requirement of borrowing limits

Bridge loans AFIs normally consider disbursement of sanctioned assistance only after execution of loan agreement. In order to ensure timely implementation of project by assisted concern, AFIs provide bridge loans against sanctioned assistance, ordinarily 75% upon execution of bridge loan agreement.

Such bridge loans would be secured by - personal guarantees of promoters - deed of hypothecation – charge on machinery & other movables - demand promissory notes - execution of letter of negative lien on fixed assets

Types of bridge loans - Against sanctioned loan assistance - Against public issues

Procedure for loan documentation - pass requisite board resolution accepting the LOI and for execution of loan agreement and other document - ensure other participating Fis sanction their portion - if non residents guarantee the loan obtain RBI approval - obtain shareholders approval for creation of security on the assets

- obtain certificate from legal advisor or a practicing company secretary that the company and its directors have necessary powers to enter into loan agreement to avail proposed loan - obtain certificate from statutory auditors regarding utilization of borrowing limits - execute loan and security documents

Disbursal The lead lending financial institution will periodically evaluate physical and financial progress of the project and ensue that the borrower has satisfactorily complied with pre disbursement conditions and special conditions prior to applying release of disbursement

To facilitate this the borrower should submit - physical progress of the project - financial status of project - whether entire financing arrangement has been tied up - whether promoters contribution has been brought in - fund flow statement for minimum 12 months - compliance report on terms and conditions - compliance report on statutory requirement

Creation of final security First mortgage on immovable property and hypothecation and moveable property

Borrower to submit - copies of land title deeds - legal officer would verify ownership records for 30 years - creation of pari passu charge in favour of Fis through exchange of letters - income tax clearance - submit original title deeds

Thank you