INDEX

Sr.No Topic Page No.

1 INTRODUCTION 2
2 INNOVATION IN BANKING 3
3 MEANING OF TERM LOAN 4
4 MEANING OF LOAN SYNDICATION 5
5 INTRODUCTION TO LOAN SYNDICATION 6
6 FEATURES OF SYNDICATED LOANS 10
7 STAGES IN SYNDICATION 12
8 PURPOSE FOR SYNDICATED LENDING 14
9 ADVANTAGES OF SYNDICATED LOANS 15
10 PROJECT FINANCE AND LOAN SYNDICATION 18
11 LOAN SYNDICATION FINANCIAL INSTITUTION 22
12 LOAN DEPOT 24
13 SYNDICATED LOAN MARKET 26
14 HOW THE MARKET WORKS 28
15 OVERVIEW OF ICICI BANKS 30
16 HISTORY OF ICICI BANK 31
17 ICICI BANK SYNDICATE 32
18 36
SYNDICATION ADVISORY AND OTHER SERVICE
19 38
IMPORTANT PROVISION OF LOAN SYNDICATION AGREEMENT
20 DOCUMENTATION FOR SYNDICATED LOAN 39
21 FEATURES OF LOAN SYNDICATION 42
22 APPLICATION QUALIFICATION AND REQ. 45
DOCUMENTS
23 PROCESS 46

24 KIND REMINDER AND CASE 47,48

25 QUESTIONNAIRE FOR BANKERS 49

26 CONCLUSION 50
27 BIBLOGRAPHY 51

1
 INTRODUCTION

Banks play an important role in the economic development of a nation. Banks provide a number
of functions. The term bank comes from the word ’BANCO’ which means a bench. In earlier
days European money lenders used to display coins of different countries in big heaps on
benches or tables for the purpose of lending or exchanging. It receives money from those who
want to save in the form of deposits and lends the money to those who need it.The primary
functions of the bank are known as banking functions and the secondary functions of the bank
are known as non-banking functions.

A Bank is a financial institution which deals with deposits and advances and other related
services. The term banking has undergone tremendous changes over the years. The traditional
and commercial banking activities of accepting deposits and lending have been replaced by the
concept of universal banking and now international banking. Banks are expanding their
operations, entering new markets and trading in new asset types. The change in financial system
has created new opportunities along with new risks.

The banks plays a vital role in modern business without banks, it would be highly difficult to
conduct business activities in a smooth manner. A bank is a vital aid-to-trade. Thus bank is an
evolutionary concept. It acts as a connected link between borrowers and lenders of money. For
the past three decades India’s banking system has several outstanding achievements to its credit.
The most striking feature is its extensive reach. It is no longer confined to metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached even to the remote countries
of the world. This is the main reason of India’s growth process.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or
for withdrawing his own money. Today, he has a choice. Gone are the days when the most
efficient bank transferred money from one branch to another in two days. Now it is simple as
instant messaging or dial a pizza. Money has become the order of the day. The modern day
banking consist of all activities viz .accounts of non residents, financing exports and imports,
financing in foreign currencies, cross border financing, syndication of loans and many other
activities. With the introduction of new products and services in the banking sector it has made
the life of a common man more simple and easy.

2
 INNOVATION IN BANKING:-

TECHNOLOGY FOR VALUE CREATION

1) Internet Banking
2) Mobile Banking
3) Payment and Settlement Systems(RTGS)
4) Benefits of Technology in Banking

RURAL INDIA CATCHING UP

1) Micro Finance and Self Help Groups

BANKING BEYOND BANKING

1) Personal Banking
2) Retail Banking
3) NRI Services
4) Bancassurance
5) Any Branch Banking

THE CHANGING FACE OF BANKING

1) Universal banks
2) Smart Cards
3) Outsourcing BPO

The banking sector is an upcoming sector in the market these days with the innovation of new
techniques and opening up of new branches around the country. Their main aim is at consumer
satisfaction. It is a sector of great importance to the common man and it continues to expand in
leaps and bounds every day. The banks are rightly called as “nerve centers of business” and
backbones of modern industries and commerce.

3
 MEANING OF THE TERM LOAN

A loan is a type of debt. All material things can be lent. Like all debt instruments, a loan entails
the redistribution of financial assets over time, between the lender and the borrower. It is also
defined as:-

Something lent for temporary use. A sum of money lent at interest.

For example: - An act of lending; a grant for temporary use: asked for the loan of a garden.

A temporary transfer to a duty or place away from a regular job: an efficiency expert on loan
from the main office.

Loans represent the majority of a bank’s assets. a bank can typically earn a higher rate of interest
on loans than on securities. Loans however, come with risk. If a bank makes bad loans to
consumers or businesses, the banks may suffer on defaulter of repayments.

-Loan is an advance paid by the bank to the customer either with security or without
security is called as loan. If a loan is given without security it is called as an advance.
It is given for a fixed period of time and aggregate rate of interests. Repayments are
spread over from a period of 1- 5 years. It is also known as demand loan and it is
repayable on demand.

-The loans are granted to meet long term working capital needs and for expansion and
modernization. Interest is charged on the actual amount sanctioned, whether
withdrawn or not. Loans may be short-term, medium-term or loan term. Long term
loans are generally for meeting the working capital requirements. Such loans are also
called as term loans. When a loan is meant for meeting both fixed and working capital
requirement of a borrower, it is called as a “Composite loan”.

4
 MEANING OF LOAN SYNDICATION

An association of individuals formed for the purpose of conducting a particular business or a

joint venture.

Pooling of resources by financial institutions in a financing project to spread the risk. Individual
return from the investment is proportionate to the degree of risk or amount of funds that each has
put up or underwritten.

A syndicate is a general term describing any group that is formed to conduct some type of
business. For example, a syndicate may be formed by a group of investment bankers who
underwrite and distribute new issues of securities or blocks of outstanding issues. Syndicates can
be organized as corporations or partnerships.

A Syndicated loan (or ‘syndicated bank facility’) is a large loan in which a group of banks work
together to provide funds for a borrower. There is usually one lead bank (the "Arranger" or
"Agent") that takes a percentage of the loan and syndicates the rest to other banks. A syndicated
loan is the opposite of a bilateral loan, which only involves one borrower and one lender (often a
bank or financial institution.

A syndicate only works together temporarily. They are commonly used for large loans or
underwritings to reduce the risk that each individual firm must take on.
It can also be termed as an association of people or firms formed to engage in an enterprise or
promote a common interest or an association of people or firms authorized to undertake a
duty or transact specific business.

The cost of a syndicated loan consists of interest and a number of fees-management fees,
participation fees, agency fees and underwriting fees when the loan is underwritten by a bank
or a group of banks. Spreads over LIBOR depend upon borrower's credit worthiness, size and
term of the loan, state of the market (e.g. the level of LIBOR, supply of non-bank deposits to
the EURO banks,) and the degree of competition for the loan.
 INTRODUCTION TO LOAN SYNDICATION

Loan syndication refers to services rendered by an organization in arranging and procuring credit
from financial institutions, banks, other lending and investment companies for financing the
project or meeting the working capital requirements.

The loan syndication work involves identification of sources where from funds would be
arranged, approaching these sources with requisite application and supporting documents and
complying with all the formalities involved in the sanction and disbursal of loan.

In loan syndication there is a leader bank who undertakes all the duties and functions of finance.
The fees charged by merchant banker for undertaking loan syndication vary up to one percent of
the total loan amount.
Syndicated loans provide borrowers with a more complete menu of financing options. In effect,
the syndication market completes a continuum between traditional private bilateral bank loans
and publicly traded bond market.
Loan syndications is responsible for arranging co-financing with commercial banks and other
financial institutions directly or indirectly with export credit agencies (ECA’S).

Loan syndications has chosen a flexible and market oriented approach.

Loan syndication refers to assistance rendered by merchant banks to get mainly term loans for
projects. Such loans may be obtained from a single financial institution or a syndicate or
consortium.

Merchant bankers provide help to corporate clients to raise syndicated loans from commercial
banks. Merchant bankers help corporate clients to raise syndicated loans from commercial banks.

Merchant banking is an institution which covers a wide range of activities such as portfolio
management, credit syndication, and corporate advisory services. They help clients approach
financial institutions for term loans.

The Loan Syndications team includes dedicated professionals in Chicago, New York, Toronto
and London who are active in the bank market and have an in-depth knowledge of the current
trends in loan pricing, structure and trading activities.

As the size of the individual loans increased, individual banks found it difficult to take the risk
single handed- regulatory authorities in most countries limit the size of the individual exposures.
Hence the practice of inviting other banks to participate in the loan, to form a syndicate, came
into being; thus the term “Syndicated loans”

A loan syndicate refers to the negotiation where borrowers and lenders sit across the table to
discuss about the terms and conditions of lending. At present Large groups of banks are forming
syndicates to arrange huge amount of loans for corporate borrowers.
The need for syndication arises as the size of the loan is huge and a single bank cannot bear the
whole risk of lending. Also the corporate going for the issue is not aware about the banks which
are willing to lend. Hence syndication assumes significance.

In the case of syndication the risk gets diversified. The process of syndication starts with an
invitation for bids from the borrower. The borrower mentions the funds requirement, currency,
tenor etc. the mandate is given to a particular bank or an institution that will take the
responsibility of syndicating the loan by arranging for financing the banks.

Syndication is done on a best effort basis or on underwriting basis. It is usually the lead manager
who acts a syndicator of loans. The lead manager has dual tasks i.e. formation of syndicate
documentation and loan agreement.

Common documentation is signed by the participating banks on the common terms and
conditions.

The advantages of syndicated loans are the size of the loan, speed and certainty of funds,
maturity profile of the loan, flexibility in repayment, lower cost of funds, diversity of currency,
simpler banking relationships and possibility of renegotiation.

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 volume of syndicated loan issuance had risen to $1.2 trillion, a $100 billion increase over
the year before. The businesses that are choosing this option to finance their growth have
expanded beyond the Fortune 500 companies that were its first users.

They have now become a flexible funding source for both mid-sized companies and smaller
companies that are on the cusp of moving into mid-sized status.
The simple reality is that "Companies can given these obstacles, business owners and executives
often express interest in syndicated loans, which offer consolidation of effort and the possibility
of making new banking contacts. Lenders support their use as well. Lenders like syndications
because they permit them to make more loans, while limiting individual exposures and spreading
their risk within portfolios more widely. "Moreover, administration of the loan is extremely
efficient, with the agent managing much of the process on behalf of the participants."

Borrowers taking out syndicated loans pay upfront fees and annual charges to the participating
banks, with interest accruing (on a quarterly, monthly, or semiannual basis) from the initial
draw-down date. "One advantage of syndication loans is that this market allows the borrower to
access from a diverse group of financial institutions,” In general, borrowers can raise funds more
cheaply in the syndicated loan market than they can borrowing the same amount of money
through a series of bilateral loans.

Syndicated loans are a special category of loans in which an arranger, or group of arrangers,
forms a group of creditors on the basis of a mandate to finance the debtor. The debtor is usually a
company with an excellent rating. The debtor chooses this type of loan primarily because the
required loan volume exceeds the possibilities of one creditor through bilateral financing, both
from the perspective of a risk analysis of the debtor’s position as well as the creditor’s strategy.
Despite the fact that the debtor and creditors only enter into one contract, the creditors’ rights
and obligations are several and independent of each other.

FEATURES OF SYNDICATED LOANS

The syndicated loan is a financing method evolved from bilateral loan. Under the arrangement of
syndicated loan, one bank or several banks (as the arrangers) organize other banks to grant loans
to the same borrower less than one loan agreement according to agreed terms.

SYNDICATED LOANS HAVE THE FOLLOWING FEATURES:

Huge amount and long term loans.

Less pressure on banks and diversified risk.

As for the borrower, syndicated loans provide large amounts of loans with longer term and easy
operation management (only need to contact with the agent bank).

Less restriction on the use of proceeds (compared with government loans and export credit)

Easier management (Compared with loans borrowed separately from different banks)

Syndicated loans can be structured to incorporate various options. As in the case of FRS, a drop
lock feature converts the floating rate loan into a fixed rate loan if the benchmark index hits a
specified floor. A multi-currency option allows the borrower to switch the currency of
denomination on a rollover date.

Security in the form of government guarantee or mortgage on assets is required for borrowers in
developing countries like India.

Syndicated loan is more suitable as compared to a simple loan from single or multiple banks.

The borrower does not have to deal with a large number of lenders. It has permitted the issuers to
achieve more market-oriented and cost-effective financing.

Loan syndications are a cost-effective method for participating institutions to diversify their
banking books and to exploit any funding advantages relative to agent banks.
Syndicated loans have increasingly become the corporate financing choice of large- and mid-size
firms. As a result, syndicated lending has become a major component of today's financial
landscape.

Syndicated lending also allows banks to compete more effectively with public debt markets for
corporate borrowers. To a large extent, the development of the loan syndication market has
stemmed, if not reversed, the trend toward disintermediation of corporate debt by reducing the
differences between intermediated and public debt markets.
 STAGES IN SYNDICATION

PRE-MANDATE STAGE

PLACING THE LOAN AND DISBURESEMENT

POST-CLOSURE STAGE
Broadly there are three stages in syndication, viz., Pre-mandate phase, Placing the loan and
disbursement and post-closure stage.

1) PRE-MANDATE STAGE: - This is the initiated by the prospective borrower.

It may liaise with a single bank or it may invite competitor’s bids from a number of
banks. The borrower has to mandate the lead bank, and the underwriting bank, if
desired. Once the lead bank is selected and mandated by the borrower, the lead bank
has to undertake the appraisal process. the lead banks needs to identify the needs of
the borrower, design an appropriate loan structure, and develop a persuasive credit
proposal.

2) PLACING THE LOAN AND DISBURSEMENT: - At this stage, the lead

bank can start to sell the loan in the marketplace i.e. to prospective participating
banks. This means that the lead bank needs to prepare an information memorandum,
prepare a term sheet, prepare legal documentation, approach selected banks and invite
participation. A series of negotiations with the borrower are undertaken if prospective
participants raise concerns.

To conclude this stage the lead bank must achieve closing of the syndication,
including signing. If need be, underwriting bank has to sign the balance portion of the
loan. Loan is disbursed in phases as agreed in the loan contract. Loan is disbursed in
‘no- lien’ account i.e. a bank account created exclusively to disburse loan. This
account and its withdrawals are monitored by banks. This is to ensure that the loan is
used only for the purpose defined in the loan agreement and that the funds are not
diverted to any other purpose.

3) POST-CLOSURE STAGE:- This is monitoring and follow-up phase. It has

many times done through an escrow account. Escrow account is the account in
which the borrower has to deposit it’s revenues and the agent ensures that the loan
repayment is given due priority before payments to any other parties. Hence in
this stage, the agent handles the day-to-day running of the loan facility.
 REASONS/PURPOSE FOR SYNDICATED LENDING

Like insurance, a loan is an assumption of risk. For a certain class of loan, with certain rules, the
bank might believe that it is likely that 5% of all borrowers may go bankrupt. If the bank's cost
of funds is a hypothetical 5%, the bank needs to charge more than 10% interest on the loan to
make a profit. In general, banks and the financial markets use risk-based pricing, charging an
interest rate depending on the risk of the loan product in general or the risk of the specific
borrower.

The problem with larger businesses loans, however, is that there are fewer of them. So, if the
bank has the only large business loan and if that business happens to be one of that defaults, then
the bank loses all its money. For this reason, it is in the best interest of all banks to split, or
"syndicate" their large loans with each other, so each get a representative sample in their loan
portfolios.
A second, often criticized reason for syndicating loans is that it avoids large or surprising losses
and instead usually provides small and more predictable losses. Smaller and more predictable
losses are favored by many management teams because of the general perception that companies
with "smoother" or more steady earnings are awarded a higher stock price relative to their
earnings (benefiting management who is often paid primarily by stock) . Critics, such as Warren
Buffett however, say that many times this practice is irrational. If the bank could still get a
representative sample by not syndicating, and if syndication would reduce their profit margins,
then over the long term a bank should make more money by not syndicating. This same dynamic
plays out in the investment banking and insurance fields, where syndication also takes place.

To avoid that the borrower has to deal with all syndicate banks individually, one of the syndicate
banks usually acts as an Agent for all syndicate members and acts as the focal point between
them and the borrower.

ADVANTAGES/BENEFITS OF SYNDICATED LOANS

In addition, economists and syndicate executives contend that there are other, less obvious
advantages to going with a syndicated loan.

THESE BENEFITS INCLUDE:-

Syndicated loan facilities can increase competition for your business, prompting other banks to
increase their efforts to put market information in front of you in hopes of being recognized.

Flexibility in structure and pricing. Borrowers have a variety of options in shaping their
syndicated loan, including multicurrency options, risk management techniques, and prepayment
rights without penalty.

Syndicated facilities bring businesses the best prices in aggregate and spare companies the time
and effort of negotiating individually with each bank.

Syndicate banks sometimes are willing to share perspectives on business issues with the agent
that they would be reluctant to share with the borrowing business.

Syndicated loans bring the borrower greater visibility in the open market. Bunn noted that "For
commercial paper issuers, rating agencies view a multi-year syndicated facility as stronger
support than several bilateral one-year lines of credit."

BENEFITS TO THE BORROWER

Raising a loan which would exceed the capacity of a single bank. Cutting down on management
capacity since the borrower communicates only with the arranger/agent.

Broadening the financing base through the participation of other banks.

Typically less costly than numerous lines through multiple institutions.

It helps to enhance broader financial relationships. Deals with a single bank.

Quicker and simpler than other ways of raising capital. E.g. Issue of equity or bonds.

BENEFITS TO THE INVESTOR

Establishing direct relationships with new customers.

Enables much broader risk diversification without significant additional marketing efforts.

Due to uniform documentation there is a better chance for a subsequent placement on the
secondary market.

Contract documents and information provided at no expense.

BENEFITS TO THE LEAD BANKS

Fund arrangement and other fees can be earned without committing capital.

Enhancement of bank’s reputation.

Enhancement of bank’s relationship with the client.

BENEFITS TO THE PARTICIPATING BANKS

Access to lending opportunities with low marketing/ processing costs. It triggers more
opportunities to participate in future syndications as network of the banks establishes a level of
comfort with each other.

In case the borrower runs into difficulties, participant banks have equal treatment.

PROJECT FINANCE AND LOAN SYNDICATION

 WORKING CAPITAL FINANCE

Working capital finance is done in order to meet the entire range of short-term fund requirements
that arise within a corporate day-to-day operational cycle.

The working capital loans can help the company in financing inventories, managing internal cash
flows, supporting supply chains, funding production and marketing operations, providing cash
support to business expansion and carrying current assets.

The working finance products comprise a spectrum of funded and non-funded facilities ranging
from cash credit to structured loans, to meet the different demands from all segments of industry,
trade and the services sector. Funded facilities include cash credit, demand loan and bill
discounting. Demand loans are considered also under the FCNR (B) scheme. Non-funded
instruments comprise letters of credit (inland and overseas) as well as bank guarantees
(performance and financial) to cover advance payments, bid bonds etc.

PROJECT FINANCE

In general, project finance covers Greenfield industrial projects, capacity expansion at existing
manufacturing units, construction ventures or other infrastructure projects. Capital intensive
business expansion and diversification as well as replacement of equipment may be financed
through the project term loans.

Project finance is quite often channeled through special purpose vehicles and arranged against
the future cash streams to emerge from the project.

The loans are approved on the basis of strong in- house appraisal of the cost and viability of the
ventures as well as the credit standing of promoters.

CORPORATE TERM LOAN

The corporate term loans can support the company in funding ongoing business expansion,
repaying high cost debt, technology up gradation, leveraging specific cash streams that accrue
into the company, implementing early retirement schemes and supplementing working capital.

Corporate term loans can be structured under the FCNR (B) scheme as well, with the option of
switching the currency denomination at the end of interest periods. This will helps to take
advantage of global interest rate trends vis-à-vis domestic rates to minimize your debt cost.

The bank’s corporate term loans are generally available for tenors from three to five years,
synchronized with your specific needs.

The corporate term loans carry fixed or floating rates, as befits the exact requirement of the client
and the risk context. Again, these rates will be linked to the bank’s prime lending rate.

The corporate term loans can have a bullet or periodic repayment schedule, as required by the
client. The repayment mode may be linked to the cash accruals of the company.

The Bank’s expert credit crew gauges the applicant’s particular fund requirements and evaluates
the company’s credit worthiness, factoring in the cash flows generated by it.

STRUCTURED FINANCE

The structured finance involves assembling unique credit configurations to meet the
complex fund requirements of large industrial and infrastructure projects. Structured finance
can be a combination of funded and non-funded facilities as well as other credit
enhancement tools, lease contracts for instance, to fit the multi-layer financial requirements
of large and long-gestation projects.

CHANNEL FINANCING
Channel financing is an innovative finance mechanism by which the bank meets the various fund
necessities along the supply chain at the supplier’s end itself, thus helping to sustain a seamless
business flow along the arteries of the enterprise.

Channel finance ensures the immediate realization of sales proceeds for the client’s supplier,
making it practically a cash sale. On the other hand, the corporate gets credit for a duration
equaling the tenor of the loan, enabling smoother liquidity management.

PARTIES AND ROLES WITHIN THE SYNDICATION PROCESS

The lead bank and participating banks are the main parties involved in loan syndication. In large
loan amounts, sometimes there are four parties involved, other than the borrower, in the
syndication process. These are arranger {lead manager/ bank}, underwriting Bank, Participating
Banks and the facility manager {agent. their roles are defined as follows:-

1. ARRANGER/LEAD MANAGER: - It is a bank which is mandated by the

prospective borrower and is responsible for placing the syndicated loan with other
banks and ensuring that the syndication is fully subscribed. This bank charges
arrangement fees for undertaking the role of lead manager. Its reputation matters in
the success of syndication process as the participating banks would agree or disagree
based on the credibility and assessment expertise of this bank. In other words, since
the appraisal of the borrower and its proposed venture is primarily carried out by this
bank, onus of default is indirectly on this bank. Thus this bank carries ‘reputation risk’
in the syndication process.

2. UNDERWRITING BANK: - Syndication is a process of arranging loans,

success of which is not guaranteed. The arranger bank may underwrite to supply the
entire remainder (unsubscribed) portion of the desired loan and in such a case arranger
itself plays the role of “underwriting bank”. Alternatively a different bank may
 underwrite (guarantee) the loan or portion (percentage of the loan). This bank would
be called the “underwriting bank”. It may be noted that all the syndicated loans may
not have this underwriting arrangement .Risk of underwriting is obviously the
“underwriting risk”. It means it will have to carry the credit risk of the larger portion
of the loan.

3. PARTICIPATING BANKS: - These are the banks that participate in the

syndication by lending a portion of the total amount required. These banks charge
participation fees. These banks carry mostly the normal credit risk i.e. risk of default
by the borrower. As like any normal loan. These banks may also be led into passive
approval and complacency risk. It means that these banks may not carry rigorous
appraisal of the borrower and has proposed project as it is done by the lead manager
and many other participating banks. It is this banker’s trust that so many high profile
banks cannot be wrong. This may be seen in the light of reputation risk of the lead
manager.

4. FACILITY MANAGER/AGENT: - Facility manager takes care of the

administrative arrangements over the term of the loan (e.g. Disbursements,
repayments and compliance). It acts for and on behalf of the banks. In many cases the
arranging/underwriting bank itself may undertake this role. In larger syndications co-
arranger and co-manager may be used.
 LOAN SYNDICATING FINANCIAL INSTITUTIONS

Union Bank of India, has entered into a Memorandum of Understanding [MOU] with IDFC, one
of the leading Infrastructure Financing Institution and Bank of India, another leading Public
Sector Bank for jointly Syndicating & Financing the large Infrastructure & core industrial
projects, which are coming up in the country.

This is the first time when a premier Infrastructure financing Institution and two large Public
Sector Banks are coming together to share the skill sets developed over a period of time, to
Syndicate/Underwrite the Debt and extend total financial solution for large projects coming up in
the Public Private Partnership [PPP] domain as well as in the Private Sector.

IDFC (Industrial Development Financial Corporation) is a premier Infrastructure Financing

Institution having vast experience in financing mega projects over a broad spectrum of
industries. Union Bank of India & Bank of India are amongst the large Public Sector Banks
having vast experience in providing Working Capital besides extending project finance.

This arrangement will facilitate joint identification, marketing and appraisal of Syndicated Loans
with underwriting arrangements.

It is envisaged that the promoters in the PPP would largely benefit from this Tie-up, which
would provide a total financial solution, Term Loan for the project as well as Working Capital.

In fact, the benefits of Syndication would accrue to all the concerned parties especially the
borrower:
- Single point contact with the Lead Arranger.
- Submission of papers only to the Lead Arranger.
- Joint Appraisal leading to quick decisions.
- Possibility of securing competitive terms.

Financial sector plays an indispensable role in the overall development of a country. The most
important constituent of this sector is the financial institutions, which act as a conduit for the
transfer of resources from net savers to net borrowers, that is, from those who spend less than
their earnings to those who spend more than their earnings. The financial institutions have
traditionally been the major source of long-term funds for the economy. These institutions
provide a variety of financial products and services to fulfill the varied needs of the commercial
sector. Besides, they provide assistance to new enterprises, small and medium firms as well as to
the industries established in backward areas. Thus, they have helped in reducing regional
disparities by inducing widespread industrial development.

The Government of India, in order to provide adequate supply of credit to various sectors of the
economy, has evolved a well developed structure of financial institutions in the country.
These financial institutions can be broadly categorized into All India institutions and State level
institutions, depending upon the geographical coverage of their operations.

At the national level, they provide long and medium term loans at reasonable rates of interest.
They subscribe to the debenture issues of companies, underwrite public issue of shares,
guarantee loans and deferred payments, etc. Though, the State level institutions are mainly
concerned with the development of medium and small scale enterprises, but they provide the
same type of financial assistance as the national level institutions.

Other Financial Institutions Include: - NABARD (National Bank for Agriculture and Rural
Development) EXIM (Export Import Bank of India) IFCI (Industrial Financial Corporation of
India).

LOAN DEPOT
The Loan Depot Inc was incorporated in Canada in October 1998 by a group of Finance and
Real Estate professionals with experience in the Domestic and International Finance Markets and
International Real Estate Hedge Markets for over 10 years.

The main businesses of The Loan Depot are Domestic and International Finance, Loan
Syndication from International Funding Agencies and Major World Banks, Project Financing,
Real Estate Acquisition syndication and hedging.

In 2000 the Corporation moved its head quarters from Ontario, Canada to Chattanooga, TN. In
2001, the company expanded its operations to include conventional and government guaranteed
lending products. The Surviving Company is now know as "THE LOAN DEPOT, LLC", and is
committed to provide the highest level of service to our customers, borrowers and brokers.

Their Mission at The Loan Depot is to anticipate and successfully meet the changing needs of
our client and match them with the requirements of the capital market. The standard of
excellence is upheld through our innovative thinking, our unique competitive advantage, and
most importantly, our dedication to our client.

Their goal is to provide you attractive financing options that will best serve your individual
financing needs. They have successfully laid a firm foundation for financing a broad range of
loans. They look forward to working with people and helping them in their business.

They pride themselves in being one of the most innovative, diversified group of financial service
companies in the United States and Canada and plan on staying that way.

Loan depot offers a number of custom services to help to achieve financial goals.

MORTGAGES
Loan Depot offers a wide variety of options for all mortgage needs offer the
best rates and with over 150 products we specialize in self employed and not
so perfect credit situations(i.e.: bankruptcy, divorce ). Their programs
include 100% financing for purchase or re-finance to consolidate debt or for
investment purposes.

AUTO LOANS

Offer a variety of finance plans for the purchase or re-finance of new and
pre-owned vehicles.

LOANS

Loan Depot is a full service loan placement firm. They offer secured and
unsecured loans available to people in every credit situation. Their rates are
competitive and all situations are welcome.

RECREATIONAL VEHICLES

Loan Depot offers financing on all recreational vehicles they offer

completive rates on boats, R.Vs and ATVs etc. Their programs allow
financing new or used purchase or to-re-finance the existing vehicle at a
lower rate or better terms.

CREDIT CARDS

Loan Depot offers a secure visa to help establish or re- establish credit with
all the convenience and services one can access with a visa card.
 THE SYNDICATED LOAN MARKET

The syndicated loan market, a hybrid of the commercial banking and

investment banking worlds, is globally one of the largest and most flexible
sources of capital. Syndicated loans have become an important corporate
financing technique, particularly for large firms and increasingly for
midsized firms. The rapid development of the syndicated corporate loan
market took place in the 1990s exploring the historical forces that led to the
development of the contemporary U.S. syndicated loan market, which is
effectively a hybrid of the investment banking and commercial banking
worlds. Syndicated lending aims to increase the risks and benefits involved
in taking part in the syndicated loan market.

There has been a notable change in large corporate lending over the past
decade, as the old bilateral bank-client lending relationships have been
replaced by a world that is much more transaction-oriented and market-
oriented. The Canadian syndicated loan market has been strongly influenced
by its U.S. counterpart, but it is not yet at the same level of development. It
also explores potential risk issues for the new corporate loan market,
including implications for the distribution of credit risk in the system, risks
in the underwriting process, the monitoring function, and the potential for
risk arising from asymmetric information.

The development of the market for syndicated loans, and has shown how this
type of lending, which started essentially as a sovereign business in the
1970s, evolved over the 1990s to become one of the main sources of funding
for corporate borrowers. The syndicated loan market has advantages for
junior and senior lenders. It provides an opportunity to senior banks to earn
fees from their expertise in risk origination and manage their balance sheet
exposures.

Throughout history, innovation has driven the development of the financial

markets, and over the last 20 years, the syndicated loan market has provided
particularly fertile ground for financial innovation. From a relatively esoteric
field involving commercial banks syndicating lines of credit, financial
innovations have helped it develop into a broad, dynamic market
encompassing both an efficient primary market that originates syndicated
credits and a liquid secondary trading market where prices adjust to reflect
credit quality and market conditions.

The development of an efficient and liquid syndicated loan market in the

U.S. has greatly impacted its capital markets. The syndicated loan market
bridges the private and public fixed-income markets and provides borrowers
with an alternative to high yield bonds and illiquid bilateral commercial bank
loans. It provides much-needed credit to lower-rated companies and has
strengthened the bankruptcy process in the U.S. through its facilitation of
DIP (debtor-in-possession) lending.

Today’s syndicated loan market benefits banks also; in times of adversity,

they can sell portions of the syndicated credits into a relatively liquid
secondary market and actively manage the risk in their loan portfolios. This
allows banks to avoid unnecessary lending restrictions when the economy
contracts and thus the impact of an inefficient “credit crunch.”

The development of the secondary market for syndicated loans has led to the
creation of a new asset class with greater return per unit of risk than many
other fixed-income assets and low correlations with most other classes of
assets. The leveraged portion of the market, the part of the market where
most innovation has occurred, receives special attention. Syndicated loans
are an integral part of capital rising for these markets.

This analysis provides a primer to investors and other parties interested in a

market that has, without great fanfare, been one of the most rapidly growing
and innovating sections of the U.S. capital market in the past 20 years. It
explores issues related to the main features of the primary market using the
most recent data available and details the characteristics of the secondary
market. Investment returns, as well as the risks of the asset class, particularly
credit risk, receive special attention.

The syndicated loans market has grown rapidly in recent years, driven
primarily by an increase in corporate takeovers, private equity transactions
and infrastructure deals. Strong liquidity means there is plenty of cash to
invest, and banks are willing lenders.

The leveraged loan market remains small compared with the investment-
grade market and bankers said the investors and their attitudes were
markedly different. The volumes in the Indian offshore syndicated loan
market have grown enough in the past few years.

HOW THE MARKET WORKS

Major corporate clients will almost automatically consider a syndicated loan

for sums above a few hundred million euro’s.

Syndication splits the lending risk between large number of investors, at

price (margin and fees) determined by the market. It is an efficient way of
raising funds quickly and on best terms. For borrowers the advantage is that
they can raise larger amounts and expand their group of bankers whilst at the
same time only having to sign a single contract

For lenders, syndication allows a diversification of the lending portfolio from

both a geographical and sectorial point of view. In addition, lenders get the
benefit of the facility agent’s expertise in management of draw downs and of
other events in the lifetime of the loan after the facility agreement has been
signed.

The syndicated loan market was originally developed in the USA in the
1970’s as a means of financing leveraged buy-outs (LBOs). It has since gone
on to become the leading vector for all sorts of financing. In Europe the
market expanded rapidly in the UK and then on the continent, particularly in
France. The market’s rapid growth can be seen from the fact that in 1993 the
total volume of the market worldwide was USD 1.4. Trillion, whereas in
2005 it exceeded USD 3 trillion (dialogic)

The rapid growth in syndicated facilities is certainly due in part to the trend
over the past fifteen years, across all sectors of the economy, towards
industry consolidation. for a borrower, the choice between a syndicated loan
and negotiable debt instruments often comes down in favor of the first.
Syndicated loans are the only means of raising, rapidly and with few
formalities, sums greater than are available on other markets, like bonds and
equities, or through private placements.

These loans may be used to cover whole ranges of uses by the borrower:
refinancing, undrawn lines of credit supporting commercial paper and
Treasury note programmed, acquisitions, LBO financing, project and other
structured financing.
By taking full advantage of the syndicated loan market, some banks have managed to make
headway in increasing their returns and still offering the borrowers some of the finest terms and
conditions ever seen. Features of the syndicated loan market such as transaction size, availability,
speed of reaction and flexibility ensure that it continues to be one of the primary sources for
issuers looking to raise capital from the markets. It will examine the needs of both borrowers and
lenders involved in the origination, structuring, distribution and management of syndicated loans
and link the process of executing a successful deal to the optimal design of a syndications unit.
Banks have benefited from this broadening of the syndicated loan market in several ways. They
are a cost-effective method for participating institutions to diversify and exploit any funding
advantages relative to agent banks.

To a large extent, the development of loan syndication market has stemmed, if not reversed, the
trend toward disintermediation of corporate debt by reducing the differences between
intermediated and public debt markets.

OVERVIEW OF ICICI BANK

ICICI Bank is India's second-largest bank with total assets of Rs. 3,446.58 billion (US$ 79
billion) at March 31, 2007 and profit after tax of Rs. 31.10 billion for fiscal 2007. ICICI Bank is
the most valuable bank in India in terms of market capitalization and is ranked third amongst all
the companies listed on the Indian stock exchanges in terms of free float market capitalization*.
The Bank has a network of about 950 branches and 3,300 ATMs in India and presence in 17
countries. ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its specialized
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture
capital and asset management. The Bank currently has subsidiaries in the United Kingdom,
Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai
International Finance Centre and representative offices in the United States, United Arab
Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK
subsidiary has established a branch in Belgium.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock
Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New
York Stock Exchange (NYSE).

HISTORY OF ICICI BANK

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,
and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%
through a public offering of shares in India in fiscal 1998, an equity offering in the form of
ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in
an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional
investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World
Bank, the Government of India and representatives of Indian industry. The principal objective
was to create a development financial institution for providing medium-term and long-term
project financing to Indian businesses. In the 1990s, ICICI transformed its business from a
development financial institution offering only project finance to a diversified financial services
group offering a wide variety of products and services, both directly and through a number of
subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and
the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging
competitive scenario in the Indian banking industry, and the move towards universal banking,
the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI
Bank would be the optimal strategic alternative for both entities, and would create the optimal
legal structure for the ICICI group's universal banking strategy. The merger would enhance value
for ICICI shareholders through the merged entity's access to low-cost deposits, greater
opportunities for earning fee-based income and the ability to participate in the payments system
and provide transaction-banking services. The merger would enhance value for ICICI Bank
shareholders through a large capital base and scale of operations, seamless access to ICICI's
strong corporate relationships built up over five decades, entry into new business segments,
higher market share in various business segments, particularly fee-based services, and access to
the vast talent pool of ICICI and its subsidiaries.

ICICI BANK SYNDICATION

ICICI Bank arranges foreign currency loans for corporates. Foreign Currency credit is arranged
through commercial loans, syndicated loans, bonds and floating rate notes, lines of credit from
foreign banks and financial institutions, and loans from export credit agencies

Backed by a vast network of 8 overseas offices and over 700 correspondent banks, ICICI Bank
has an edge over others in its ability to arrange cross-border financing. With an established
presence in all the major global financial centers and long experience in structured financing,
ICICI Bank is strongly positioned to offer financial solutions that suit the specific requirements
of the client.

They have a primary focus on Indian clients and can provide with insightful credit information
and help to extract more value from the transactions. They are very active in granting and
arranging various forms of External Commercial Borrowing (ECB) facilities for the Indian
corporate.

SYNDICATION DESK AT ICICI BANK

ICICI Bank has set up a dedicated syndication desk in its International Banking Group in India to
pursue syndication business. The Syndication Group in India works in tandem with the
Corporate Banking Relationship Managers to lease with the Indian corporate for arranging ECBs
for them.

ICICI Bank has also formed syndication teams in various overseas offices (USA, UK, Singapore
and Bahrain). These teams consist of specialists who are veterans in international syndicated
loans market and have strong understanding of the Indian ECB market. International presence
has not only increased ICICI Bank's reach to the international investor community but also
significantly enhanced the underwriting capability.

SERVICE OFFERING

Providing foreign currency loans to the Indian corporate. Arranging / underwriting External
Commercial Borrowings for the Indian corporate by way of foreign currency loans, FRNs,
bonds, etc.

Participating in the international loan syndications. Granting loans backed by Export Credit
Agencies.

Consultancy services on the cross-border funding through variety of sources.

Arranging credit facilities / financial packages for overseas projects of the Indian Companies.

ICICI Bank services the financial sector for the entire set of banking requirements and
provides a complete range of solutions. The Financial Institutions and Syndication Group
(FISG) are responsible for ICICI Bank's relationship with the financial sector.

Under this umbrella, the Bank caters exclusively to the needs of Domestic Financial Institutions.
• Banks.
 • Mutual Funds.
• Insurance Companies.
• Fund Accounting.

The FISG has built strong relationships through various interactive measures, like seminars,
training programs, sharing of market information and views with clients, organizing the
Bank CEOs' Forum, etc.

THE SERVICES PROVIDED TO THE CLIENTS ARE AS FOLLOWS:-

TRANSACTION BANKING

The Bank delivers world class banking services to financial sector clients. Their current roaming
accounts empower you with 'Anytime, Anywhere Banking'. They are designed for your
convenience.

Their comprehensive collection and payment services span India's largest CMS network of over
4,500 branches.

They provide correspondent banking tie-ups with foreign banks to assist them in their India-
related businesses.
 LOAN SYNDICATION

The FISG is responsible for syndication of loans to corporate clients. They ensure the participation
of banks and financial institution for the syndication of loans. Some of the products syndicated are
as follows:-

1. Project Finance
2. Corporate Term Loans
3. Working Capital Loans
4. Acquisition Finance, etc.

SELL DOWN: - ICICI Bank is a market leader in the securitization and asset sell-down
market. From its portfolio, the FISG offers different products to its clients in this segment. The
products are given below:

• Asset-Backed Securities (ABS).

• Mortgage-Backed Securities (MBS).
• Corporate Loan Sell-down.
• Direct Loan Assignment.

RESOURCES: - The bank also raises resources from clients, for internal use by issuing a
variety of products, which run from certificate of deposit (CD’s) to term deposits.
 SYNDICATION ADVISORY AND OTHER SERVICES

IDBI has set up a separate department called 'Sourcing and Syndication Department' (SSD)
to take up various investment banking services so as to provide all types of financial and advisory
services to the companies for their project and expansion activities, raising funds from domestic
and international market, growth plans by way of mergers & acquisitions, carbon credit activities
etc. Important services offered by SSD are as under:

DEBT SYNDICATION - Syndication of long term loan (Rupee loans as well as Foreign
Currency loans), working capital loans, and non-fund based limits etc. Debt Syndication can be in
forming of structured loans, bonds/debentures etc.

EQUITY SYNDICATION - Syndication of equity funds by way of strategic investment,

private placement including with private equity funds, preferential allotment, Qualified
Institutional Placement (QIP) etc.

PUBLIC ISSUES / RIGHT ISSUES - Managing Public Issues/Right Issues through

Ibis’s subsidiary viz., IDBI Capital Market Services Ltd. (ICMS).

MERCHANT APPRAISALS- Appraisal of projects including new projects, expansion,

modernization, amalgamation/merger schemes which aids the companies to take a decision for
investment. Merchant appraisals are also carried out for various projects in infrastructure sector
for qualifying in the bidding process.

ARRANGING FUNDING FOR OVERSEAS ACQUISITIONS - Several

corporate aspire to acquire units abroad to achieve their global business plans and require funds
to acquire the stake in the units to be acquired. SSD arranges for such funds through its strong
relationship with all banks and financial institutions.

ACTING AS AN INITIAL PUBLIC OFFER MONITORING AGENCY –

As per guidelines of Securities and Exchange Bureau of India (SEBI), any IPO of the size more
than Rs. 500 crore requires a financial institution to certify the end use of funds on semiannual
basis.

OFFERING ADVISORY FOR MERGERS/ACQUISITIONS –

Advising companies in their plans of mergers/acquisitions including identifying target companies,

undertaking financial due diligence, working out the financial projections, structuring of purchase
consideration etc. Bank syndicates control the risk sector by downsizing the industry when market
demand fails to meet the expectations.

The market for syndicated loans is huge. The standard forces for why banks join forces in a
syndicate are risk diversification. The banks in the syndicate share the risk of large indivisible
investment projects. Syndicates may also arise because additional syndicate members provide
informative opinions of investment projects. The motive for syndication is to control the risk of the
loan portfolio, rather than sharing the risk.

Syndicated loan services include structuring, arranging and underwriting of loan facilities. The
syndicated market is one of the largest and most flexible sources of capital in the international
finance marketplace.

IMPORTANT PROVISION OF LOAN SYNDICATION AGREEMENT

1. The loan agreement specifies the interest, commitment fees and the management fees that
the borrower should pay to the lender.

2. Document pertaining to borrower’s financial position, over run finance agreement, got
approvals received (for example: relating to tax, reduction at sources) trying up of other
financial requirements (if required),certificates from lawyers, and other internal and
external approval that would be required.

3. The primary or the secondary security against which the loan is taken will have to be
decided.

4. The circumstances that are to be treated as default and suit against the borrower is not
servicing the loan, cross default clauses (aimed at giving the lenders the right to accelerate
repayment of the loan in the event of the borrower or guarantor is in default under any loan
agreement), etc are decided.

5. Jurisdiction is an important element of any international loan agreement and it tells which
country’s law is applicable.

DOCUMENTATION FOR A SYNDICATED LOAN

  MANDATE LETTER

The borrower appoints the Arranger via a Mandate Letter (sometimes also called a Commitment
Letter). The content of the Mandate Letter varies according to whether the Arranger is mandated to
use its "best efforts" to arrange the required facility or if the Arranger is agreeing to "underwrite"
the required facility. The provisions commonly covered in a Mandate Letter include:
1. An agreement to "underwrite" or use "best efforts to arrange";
2. Titles of the arrangers, commitment amounts, exclusivity provisions;
3. Conditions to lenders' obligations;
4. Syndication issues (including preparation of an information memorandum, presentations to
potential lenders, clear market provisions, market flex provisions and syndication strategy);
5. Costs cover and indemnity clauses.

 ·TERM SHEET

The Mandate Letter will usually be signed with a Term Sheet attached to it. The Term Sheet is
used to set out the terms of the proposed financing prior to full documentation. It sets out the
parties involved, their expected roles and many key commercial terms (for example, the type of
facilities, the facility amounts, the pricing, the term of the loan and the covenant package that will
be put in place).

 INFORMATION MEMORANDUM

Typically prepared by both the Arranger and the borrower and sent out by the Arranger to potential
syndicate members. The Arranger assists the borrower in writing the information memorandum on
the basis of information provided by the borrower during the due diligence process. It contains a
commercial description of the borrower's business, management and accounts, as well as the
details of the proposed loan facilities being given.

It is not a public document and all potential lenders that wish to see it usually sign a confidentiality
undertaking.

 ·SYNDICATED LOAN AGREEMENT

The Loan Agreement sets out the detailed terms and conditions on which the Facility is made
available to the borrower.

 FEE LETTERS

In addition to paying interest on the Loan and any related bank expenses, the borrower must pay
fees to those banks in the syndicate who have performed additional work or taken on greater
responsibility in the loan process, primarily the Arranger, the Agent and the Security Trustee.
Details of these fees are usually put in separate side letters to ensure confidentiality. The Loan
Agreement should refer to the Fee Letters and when such fees are payable to ensure that any non-
payment by the borrower carries the remedies of default set out in the Loan Agreement.

 REALIZING CAPITAL

If the loan is a long-term facility, a lender may need to sell its share of the commitment to realize
capital or take advantage of new lending opportunities.

 RISK/PORTFOLIO MANAGEMENT

A lender may consider that its loan portfolio is weighted with too much emphasis on a particular
type of borrower or Loan or may wish to alter the yield dynamics of its loan portfolio. By selling
its commitment in this loan, it may lend elsewhere, thus diversifying its portfolio.

 REGULATORY CAPITAL REQUIREMENTS

A bank's ability to lend is subject to both internal and external requirements to retain a certain
percentage of its capital as cover for its existing loan obligations. These are known as "Regulatory
Capital Requirements".
  CRYSTALLIZE A LOSS

The lender might decide to sell its commitment if the borrower runs into difficulties - specialists
dealing in distressed debts provide a market for such loans. However, before the lender can go
ahead and transfer its participation in a syndicated loan, it must consider the implications of the
methods of transfer available to it under the Syndicated Loan Agreement.

 NOVATION

Novation is the only way in which a lender can effectively 'transfer' all its rights and obligations
under the Loan Agreement. The process of transfer effectively cancels the existing lender’s
obligations and rights under the loan, while the new lender assumes identical new rights and
obligations in their place.

FEATURES OF LOAN SYNDICATION

Syndicated loan is a form of loan business in which two or more lenders jointly provide loans for
one or more borrowers on the same loan terms and with different duties and sign the same loan
agreement. Usually, one bank is appointed as the agency bank to manage the loan business on
behalf of the syndicate members.
1. Large amount and long term. It can meet borrowers' demand for funds of long term and large
amount. It is generally used for new projects loans, large equipment leasing and enterprises' M&A
financing in transportation, petrochemical, telecommunication, power and other industries.

2. Less time and effort for financing. It is usually the responsibility of the arranger for doing the
preparation work of establishing the syndicate after the borrower and the arranger have agreed on
loan terms by negotiation. During implementation of the loans, the borrower does not need to face
all members of the syndicate, and relevant withdrawal, repayment of principal with interest and
other management work related to the loans shall be fulfilled by the agency bank.

3. Diversified approaches to syndicated loans. The same loan syndications can include many forms
of loans, such as fixed-term loans, revolving loans, standby L/C line on requirements of the
borrower. Meanwhile, the borrower can also choose RMB, USD, EUR, GBP and other currency or
currency portfolio, if needed.

4. It can help borrowers establish a good market image. Successful establishment of the syndicate
comes from the participants' full recognition of the borrower's financial and operational
performance, by which the borrower can build up their reputation.

5. Differences between syndicated loan and joint loan

Item Syndicated Loan Joint Loan

All members join together to All banks, independent from each

Inter-bank Relationship contact with borrowers through lead other, contact with borrowers
and agency banks. separately
 All banks make loan decision on
All banks collect information
the basis of the information
Approval of Loans separately and go through many rounds
memorandum provided by the lead
of examination.
bank

Each bank signs contract with the

Loan Contract Unified contract
borrower by itself.

Loan Terms (interest Each bank negotiates with the

rate, term, guarantee Unified conditions borrower separately with different
type) terms of loans.

Funds are collectively transferred in Loans are dispersed separately with

Loan Dispersement agreed proportions via the agency derivative deposits retained at each
bank. bank.

Management of its own share of loans

Loans Management In the charge of the agency bank
by each bank

The agency bank is responsible for

the collection of principal and Each bank collects principal and
Recovery of Loan interest according to the contract interest according to repayment of
Principal and Interest and transfer of relevant amounts to principal with interest plan separately
designated account of each bank in agreed with its borrowers
lending proportions

CURRENCY

Syndicated loan mainly adopt RMB. Besides it, USD, EUR, GBP and other currencies are also
available. Multiple currencies can be used in a single syndicated loan on demand of the borrower.

TERM
Three to five years for short-term, seven to ten years for medium-term and 10-20 years for long-
term.

INTEREST RATE

The price of syndicated loan is composed of loan interest and fees.

Lending interest rate shall be set, according to different borrowers, in line with lending interest rate
policies of the People's Bank of China, lending interest rate regulations of Bank of China and
provisions of the syndicated loan contracts.

CHARGES

Charges mainly include arrangement fee, underwriting fee, agency fee, commitment fee.

TARGET CUSTOMERS

1. Borrowers who require long-term and large-amount loan.

2. Borrowers with high reputation in the industry, whose operation ability as well as financial and
technical strength are recognized by most banks.

APPLICATION QUALIFICATIONS 

1. The borrower should be the legal persons of enterprises and public institutions as well as other
economic organizations approved and registered in People's Republic of China.
2. The borrower must be qualified for basic terms and conditions on the borrowers of Lending
General Provisions as well as crediting management policy issued by the Bank of China.

3. The borrower shall meet requirements of certain level after credit rating by the Bank of China or
other recognized rating agency;

4. The borrower shall be large and medium manufacturing enterprises or project companies with
sound operation and finance as well as strong competition in respective industries, which shall be
promising in the development.

5. The borrower has established a regular and sound partnership with Bank of China Group.

6. In the event of joining the syndicate set up by other banks, the arranger bank shall be a policy
bank, state-owned holding bank or foreign bank with sufficient credit and operational strength.

REQUIRED DOCUMENTS

1. Relevant information on the borrower and their Chinese and foreign shareholders and
guarantors;

2. Business license and articles of association of the borrower as well as joint venture or
cooperation contracts of foreign-funded enterprises and inland associated enterprises;

3. Project proposals, feasibility study reports, engineering estimates and other documents approved
by government departments and approval documents, as well as he approval documents on the
project provided by administrations of taxation, environmental protection, and customs;

4. Purchase contracts, construction contracts, supply and sale contracts of project equipment.

5. Other documents or information needed by the bank.

PROCESS

1. The sales account manager of Bank of China pays attention to the financing demands of
customers;

2. Receive loan information/financing tender documents of customers;

3. Negotiate with customers to draft of the list of loan terms and financing structure;

4. Bank of China is officially appointed by the lead bank and the principal underwriting bank of 
syndicated loans;

5. Confirmation of the loan amount by Bank of China;

6. Determination of preparation schedule, organizing strategy and invitation list of syndicates;

7. Prepare loan information memorandum and letter of syndicate invitation, and send out
the invitation to relevant financial institutions;

8. Subscription amount undertaken by participants;

9. Confirmation of the final loan limit of each loan syndication participant;

10. Parties agree to sign the loan agreement and guarantee agreement.

11. Sign agreements;

12. Work of the agency bank.

KIND REMINDER

Business of syndicated loan mainly involves arranger, lead bank, manager, participant, agency
bank, coordinator and other members, who will perform the duty, enjoy the right and assume the
risk according to the contract or their respective lending proportion. Syndicate member banks are
divided into three main levels: first, arranger (lead bank); second, manager; third, participants.

1. The arranger, responsible for organization and arrangement of the syndicated loan, is a bank or
banks which undertake preparation of syndicate and distribution on commission of customers. The
arranger usually will underwrite the whole issue of syndicated loan.

2. The lead bank underwrites a larger share of the syndicated loan, ranking the highest among
managers. Usually, the lead bank is also the arranger.

3. The manager refers to the position granted by the lead bank according to loan amount and level
undertaken by each bank in the syndicated loan with larger amount and more participants. It's a
bank responsible for establishing syndicate during the preparation stage. The managers, forming
manager board of the syndicate, are mainly responsible for organizing the examination of loan
projects and feasibility of syndicate establishment, discussing loan documents with the lead bank
and finally signing the loan contract.

4. Participants refer to the banks who accept invitation of the arranger to join the loan syndicate
and provide loans according to shares determined through negotiation. Differences with the
managers: Less loan subscription, assume no responsibility for undertaking and other practical
preparation of the syndicate.

5. The agency bank is selected by syndicate members and approved by the borrower during the
loan period. After signing the loan agreement, the agency bank, on behalf of syndicate members, is
responsible for withdrawal, repayment of principal with interest, post-loan management and other
issues on loan management as well as communication between syndicate members and the
borrower, handling contract breach, etc. in the light of terms of the loan agreement.

6. The coordinator refers to the bank, selected from lead banks, to supervise the whole syndicated
loan and to partially undertaken preparation tasks of the bank syndicate.

7. Consultant refers to the bank appointed by the borrower during the syndicated loan period,
which provides paid financial advisory service for the borrower to make correct loan decision in
face of various quotations and loan terms provided by other banks so as to facilitate all the loan
work.
CASE

In 2007, in order to acquire Alcal, Rio Tinto Group raised USD 40 billion worth of syndicated loan
across the world, Bank of China was the only bank in Asia (except Bank of Japan) that joined the
loan syndication as a co-arranger (Lead Arranger) and underwriter. It was the largest syndicated
loan project in London market (the fourth largest in the world).

In 2008, Bank of China acted as a arranger, mandated arranger and agency bank during the buyer's
USD 592 million worth of syndicated loan for Indonesia Indramayu power plant export project, in
which 18 internationally active banks have participated, and the subscribed amount was surpassed
by 4.5 times.

In 2008, Bank of China, as the exclusive mandated arranger, successfully prepared the syndicated
loan project with USD 600 million for Australia's largest telecom operator, Telstra Corporation,
and achieved oversubscription.

QUESTIONNAIRE FOR BANKER

A questionnaire is a device for securing answers to questions by using a form which the
respondent fills in him.
Q.1) what are the fees charged by the banker for undertaking the work of loan syndication?
ANS: - The fees charged by the banker for undertaking the work of loan syndication is 1% of the
total loan amount.

Q.2) To whom are these loans specially designed for?

ANS:- It is specially designed for large and medium companies, government and municipalities
and financial institutions.

Q.3) What all does syndicated lending cover?

ANS:- It covers short term transactions, export finance, subsidy management, capital market
financing, structured financing, currency management, leasing and factoring.

Q.4) Who are the main parties involved in loan syndication?

ANS:- The main parties involved in loan syndication are lead bank and the participating bank.

Q.5) If the business is internal are the syndicated loans beneficial?

ANS:- YES, to a large extent. They have becoming a key for entering new markets.

Q.6) How large is the syndicated loan market?

ANS:- In the past 10 years, secondary loan trading volume has grown 1500%. In 2001, the total
syndicated loan volume was $1.1 trillion, according to loan Pricing Corporation.

Q.7) From what time has the demand for these loans start increasing?
ANS:- The demand for these loans is increasing for over past fifteen years.
 CONCLUSION

Banking sector has seen lot of transformation in the past post liberalization period, it has become
very important for bank to give services best to their capabilities. if the customers are not
satisfied with the services provided by the bank, they will transfer their account to some other
bank. Result is loss of revenue for the bank and the loss of goodwill.

New technology needs to be introduced in the banking sector as it is utmost clear that people are
not only expecting normal banking services but they want to be as their business partners and
help accordingly. Therefore, the bank has give more and more services to the people in order to
have increased returns from fee-based function.

Professionalism is getting the key word in banking sector. People now expect the privatized
banks to become more and more professional rather that of earlier years where the staff has no
sympathy or understanding for the time value of the customer. People today demand more
working hours, more services to be provided at no extra cost or minimum cost. this has led to
more professional attitude by the banking people.

Perhaps the oldest form of services sector known to human is going through a radical change not
only throughout the world but also in India. The greatest beneficiary of this change is none other
than the human itself.

Expectations from the study are that it may contribute to the real scenario of loan syndication
demand and accordingly the banks can go for new innovative schemes. It will also specify some
recommendations and based on that banks can make suitable arrangements in a particular sector.

BIBLIOGRAPHY
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BOOKS REFFERED

1) Syndicated Lending-: A Volume in Essential Capital Market

Services-

ANDREW FRIGHT.

2) Contributions Volume 3-: A Collection of Papers on Banking,

Insurance and Finance.
3) The Book of Loan Syndication and Trading :- ALLISON
TAYLOR