Document background
A Credit Facility Letter is a fundamental banking document used in the Indian financial sector when a bank or financial institution agrees to extend credit to a borrower. This document is essential for establishing the legal and operational framework of credit facilities, whether they are term loans, working capital facilities, or other forms of credit. The letter, while more concise than a full loan agreement, carries legal weight under Indian banking laws and Reserve Bank of India regulations. It typically follows standardized formats that have evolved through banking practice and regulatory requirements, incorporating essential elements such as facility limits, interest rates, security requirements, and key terms and conditions. The document serves multiple purposes: it formally communicates the bank's offer of credit, documents the terms of the facility, and, once accepted, becomes a legally binding agreement between the parties.
