Cash Credit Agreement Template for India

A Cash Credit Agreement is extensively used in Indian banking for providing working capital finance to businesses. It is particularly suitable when a business needs regular access to funds against fluctuating current assets like inventory and receivables. The agreement, structured under Indian banking regulations and contract law, establishes a revolving credit facility where the borrower can repeatedly withdraw funds up to an approved limit. The document typically includes comprehensive details about facility limits, interest rates, security arrangements, operational procedures, compliance requirements, and default consequences. This type of agreement is commonly used by manufacturers, traders, and other businesses requiring regular working capital support, with the credit limit typically being determined based on the value of current assets provided as security.

1. Parties: Identifies the lending bank and the borrower with their complete legal names, addresses, and registration details

2. Background: Sets out the context of the agreement, including the borrower's request for the facility and the bank's agreement to provide it

3. Definitions: Defines key terms used throughout the agreement for clarity and consistency

4. Facility Details: Specifies the credit limit, purpose, tenure, and nature of the cash credit facility

5. Interest and Fees: Details the interest rate, calculation method, review periods, and all applicable fees and charges

6. Security: Describes the primary security arrangements, including hypothecation of stock, book debts, or other assets

7. Drawing Power and Operations: Outlines how drawing power is calculated and the operational mechanics of the account

8. Representations and Warranties: States the borrower's representations regarding their legal status, authority, and financial condition

9. Covenants: Lists positive and negative covenants binding the borrower

10. Events of Default: Enumerates circumstances constituting default and their consequences

11. Bank's Rights and Remedies: Details the bank's rights upon default or breach

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

13. Notices: Provides the mechanism for formal communications between parties

14. Miscellaneous: Includes standard boilerplate provisions like amendments, waivers, and severability