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Loan Guarantee Agreement for India

Loan Guarantee Agreement Template for India

A legally binding agreement governed by Indian law where a guarantor undertakes to fulfill the financial obligations of a borrower to a lender if the borrower defaults on their loan commitments. The document is structured according to Indian contract law requirements, particularly the Indian Contract Act, 1872, and includes specific provisions for enforcement under Indian banking and security regulations. It outlines the scope of the guarantee, conditions for enforcement, rights and obligations of all parties, and remedies available under Indian jurisdiction.

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What is a Loan Guarantee Agreement?

The Loan Guarantee Agreement is a crucial document in Indian banking and finance transactions, providing additional security to lenders by involving a third party (guarantor) who promises to repay the loan if the primary borrower defaults. This document is commonly used in both corporate and individual lending scenarios, particularly when the lender requires additional comfort beyond the borrower's creditworthiness. The agreement must comply with Indian banking regulations, the Indian Contract Act, 1872, and related financial laws. It typically includes detailed provisions about the guarantee's scope, enforcement mechanisms, guarantor's obligations, and lender's rights. The document becomes especially important in the context of secured lending, project finance, and corporate borrowing where parent companies often guarantee subsidiaries' loans.

What sections should be included in a Loan Guarantee Agreement?

1. Parties: Identifies and defines the Lender, Borrower, and Guarantor with their full legal names and addresses

2. Background: Explains the context of the underlying loan agreement and the purpose of the guarantee

3. Definitions and Interpretation: Defines key terms used in the agreement and rules for interpreting the document

4. Guarantee and Indemnity: Core section detailing the guarantee obligations, scope, and indemnification provisions

5. Nature and Extent of Guarantee: Specifies whether the guarantee is continuing, limited or unlimited, and its maximum liability

6. Guarantor's Representations and Warranties: Statements of fact and assurances given by the guarantor about their capacity and authority

7. Guarantor's Covenants: Ongoing obligations and restrictions on the guarantor during the guarantee period

8. Enforcement and Rights of the Lender: Conditions and process for enforcing the guarantee and lender's remedies

9. Payments and Interest: Terms for how and when payments must be made under the guarantee

10. Discharge and Release: Conditions under which the guarantor may be released from obligations

11. Notices: Process and requirements for formal communications between parties

12. Governing Law and Jurisdiction: Specifies Indian law as governing law and jurisdiction for disputes

13. Miscellaneous Provisions: Standard boilerplate clauses including severability, amendments, and counterparts

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

1. Security: Include when the guarantee is secured by specific assets or collateral

2. Corporate Guarantor Provisions: Additional provisions required when the guarantor is a company rather than an individual

3. Multiple Guarantors: Provisions for when there is more than one guarantor, defining joint and several liability

4. Cross Default: Provisions linking default under other agreements as trigger for guarantee enforcement

5. Assignment and Transfer: Include when parties want to allow transfer of guarantee rights or obligations

6. Currency Provisions: Required for cross-border transactions involving multiple currencies

7. Tax Provisions: Detailed tax clauses when significant tax implications exist

8. Step-In Rights: Include when lender requires right to take control of guarantor's business in default scenarios

What schedules should be included in a Loan Guarantee Agreement?

1. Schedule 1 - Primary Loan Agreement Details: Copy or summary of the main loan agreement being guaranteed

2. Schedule 2 - Guarantor's Assets and Liabilities: Statement of the guarantor's financial position

3. Schedule 3 - Security Details: Description of any security or collateral provided under the guarantee

4. Schedule 4 - Forms of Notice: Template forms for various notices required under the agreement

5. Schedule 5 - Payment Schedule: Details of any scheduled payments or maximum liability amounts

6. Appendix A - Board Resolutions: Corporate authorizations if guarantor is a company

7. Appendix B - Compliance Certificates: Forms for periodic compliance certification by guarantor

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

Service Agreement

Cost

Free to use
Relevant legal definitions













































Clauses



































Relevant Industries

Banking

Financial Services

Corporate Lending

Real Estate

Infrastructure

Manufacturing

Small and Medium Enterprises

Private Equity

Commercial Finance

Retail Banking

Relevant Teams

Legal

Finance

Corporate Banking

Risk Management

Compliance

Credit Assessment

Treasury

Corporate Secretarial

Loan Administration

Documentation

Relevant Roles

Chief Financial Officer

Finance Director

Legal Counsel

Corporate Lawyer

Banking Manager

Credit Risk Manager

Compliance Officer

Company Secretary

Treasury Manager

Financial Controller

Risk Assessment Officer

Loan Officer

Senior Banking Executive

Corporate Finance Manager

Industries








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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