Even though the large banks are capable enough to meet the credit needs of most of their business clients, sometimes when the amount involved in the credit is huge, the bank may ask the client to go to other banks to meet their part requirements of credit. That is because the bank might not want to bear the whole risk of lending.

In those cases, multiple banks finance the borrower. This financing could be in two arrangements: 

  • Consortium arrangement 
  • Multiple banking arrangements


  1. i) Consortium of Banks – Under the arrangement of consortium, multiple banks come together and collaborate with each other to assess the credit requirements of the client with the intention to share the credit facilities as well as the securities with Pari Passu charge. 

In most of the cases, the bank which is the largest risk acts as a leader Bank and conducts meetings, does the assessment of credit requirements of the client as well as share all the information with the other member banks from time to time. 

Although one should remember that the decisions that are taken at the Consortium meetings do not bind the individual banks and therefore the management of every bank involved in the consortium is required to approve it with their respective boards.


  1. ii) Multiple Banking – Under the system of multiple banking, the client approaches various banks separately and gets several credit facilities from those banks. 

Each bank does its own assessment of the risk involved, and decides on the credit facilities it can offer at its own terms and conditions. 

Each of the involved banks takes security for the credit and also gets it registered with ROC in favor of them. 

On a practical level, there is no coordination between the banks from which the client has taken the credit. All the banks compete with each other to protect their own business and interest. 

Although this type of system allows the borrowers to take undue advantage by getting excess borrowings and concessions in interest rates. Therefore, RBI has issued various guidelines on sharing information between banks to ensure financial discipline.


Joint Lending Arrangement (JLA) – The existing credit delivery system has allowed the high value borrowers two wheeled credit limits through multiple banking over the years. It has led to basically dilution in the quality of acid as well as the control that can be exercised by the lenders. 

In order to tackle the above situation, the Indian government has introduced some rules that govern these joint lending arrangements. 

So as per the ground rules, the below written credit limit (both fund and non-fund based) will be applicable on all the lending arrangements



Credit Limit Banks Involved
>/= 150 Crore PSBs (>1)
N.A. external rating < /= BBB
< 150 Crore recommended


Under the joint lending agreement, the bank who is approached for the maximum credit by the borrower will be designated as ‘Lead Bank’. 

If a member Bank under JLA is unable to take up the enhanced share, it could be reallocated among the other willing members. 

If there is an issue which could lead to arguments in that case the member banks who have > 50% share in the credit exposure will take the decision. 

An existing member bank can withdraw from the JLA after 2 years subject to the condition that either an existing member Bank or a new bank takes up the share of the bank which is exiting by joining the JLA. 

It must be remembered that formal JLA do not result in any delay in the delivery of credit. 

The Lead Bank is required to tie up JLA in a span of 90 days of taking credit decisions in regard to the proposal. It will also be responsible to prepare the appraisal notes, to get it circulated and to arrange for the meetings as well as documentations. 


Takeover of accounts from other Banks

Some corporates often approach different lenders to seek better facilities and higher credit limits. Press has observed that in many of the cases of existing towns which were already showing signs of sickness taken over by another bank, it turned out to be NPA as it could have predicted. 

  • To prevent unjustified or unethical takeover of accounts, guidelines have been issued to all the banks by the Department of Financial Services, Govt. of India. 
  • Banks need to put in place a policy regarding the taking over of accounts (approved by the board) and this policy needs to be incorporated in the credit policy of the bank. 
  • In normal cases, accounts whose rating > a certain level that is approved by the board are to be taken over and other concessionary facilities should be extended only to resolving cases and after recording the specific reasons in writing. 
  • Top due diligence needs to be conducted for the accounts that are proposed to be taken over including visiting the premises of the customer. 
  • All the JLA guidelines should be adhered to in all the cases where any additional exposure is sought. 
  • Those cases should not be entertained where the bank’s ED/CMD had worked earlier subject to previous approval of the board with specific reasons justifying the need of the case. 


Operational Guidelines (For taking over of accounts):

Account should be a ‘standard asset’ with a positive net worth and profit record. 

P&C Report is mandatory (before sanction, otherwise before disbursement). 

To get credit information to know all about the irregularities over the years by the borrower.

Bank is required to obtain the statement of account of all the borrowal accounts that are maintained with other bankers or Financial Institutions. The should at least pertain to the last 12 months to ensure that the account is satisfactorily operating and there are no adverse pictures that can be seen. 

Existence & Previous profit track record:

  • The record of profit should have been from the past three years with audited financial statements. 
  • They should have been profitable in the preceding two years. 
  • The borrower should have been availing credit facilities with his or her previous banker at least for the past three years. 

Enhancing Existing Limits with the present Banker:

  • The credit facilities that are to be taken over should not exceed 50%. 
  • Any other enhancement for additional limits will not be provided until the next one year or ABS. 

While taking-over of accounts, the ratio of TOL:TNW </= 4:1 

Group Accounts – While taking over the accounts of sister concerns or associate concerns, banks need to examine the consolidated position of groups. Branches how to do proper assessment independently as per the on loan policy guidelines. The Zonal office or Head Office’s administrative clearance is also required to be obtained. 

While taking over all the existing securities and to complete the documentation, proper compliance with the loan policy guidelines, compliances, legal audit, and limit approval need to be taken. 

When one borrowal account is getting transferred to another bank under JLA, the bank branch from whom the account is getting transferred needs to inform all the adverse features of the account. 


Thus, these are the brief details of the Joint Loan Agreements which have been prescribed by the Indian Government.

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