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Loan Syndication

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Loan Syndication

Syndication means joint financing by more than one bank to the same clients against a common security. This is done basically to spread the risk. It also provides a scope for an independent evaluation of risk and focused monitoring by the agent / lead bank.

In Syndication financing banks also enter into an agreement that one of the lenders may act as Lead Bank. In such case, lead bank has to co-ordinate the activities at various stages of handling the proposal i.e. appraisal, sanction, documentation, sharing of security, disbursement, inspection, follow-up, recovery, distribution of installments. / interest etc. It may also call meeting on syndication members, whenever necessary to finalize any decision.

Types of Facilities

Credit enhanced syndicated loan. Working Capital Syndication. Loan for BMRE / New Projects. Project Finance Loan Local Currency Loan under Structured Finance etc

Parties to the Syndication

Arranger (Single Arranger / Co-Arranger / Arranger Group). Arranger must obtain mandate from the customer / Borrower. Participants (Banks / Financial Institutions etc.).

Advantages of Customers

May get a large loan by contacting with one Bank / Arranger. Less time consuming and cost effective. Answerable to only one Bank.

Syndicated loans are loans made by two or more lenders and administered by a common agent using similar terms and conditions and common documentation. According to Business Credit, most loan syndications take the form of a direct-lender relationship, in which the lead lender is the agent for the other lenders in the origination and administration of the loan, and the other lending banks are signatories to the loan agreement. In the last several years the popularity of this type of loan has exploded. By 2000, the total annual

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