Pari-Passu Agreement
Legal contract binding all lending consortium members and the borrower regarding shared security ranking.
Agreement Designer
Step 1 of 32026 Compliance
Pari-Passu ranking must now be explicitly registered with NeSL for digital charge recognition.
- Ensures proportional distribution of recovery proceeds.
- Custody remains with Lead Bank under modern DDE protocols.
Legal Takeaways
No preference in ranking despite dates of individual bank sanctions.
Joint charge creation requires unified ROC filing (Form CHG-1).
Want to know the difference between a Pari Passu Agreement and a Pari Passu Letter? Check our detailed side-by-side legal comparison, procedural roles, and stamp duty requirements on the letter page.
FAQs on Pari Passu Agreements
Legal and operational insights for credit documentation officers and consortium managers.
What is a Pari Passu Agreement in consortium lending?
A Pari Passu Agreement is a formal, legally binding multipartite contract executed between the corporate borrower, the lead bank, and all participating lenders. It legally covenants that all member banks hold equal, proportionate rights over hypothecated assets and mortgaged properties without any priority of one bank over another.
How does a Pari Passu Agreement differ from a Pari Passu Letter?
While a Pari Passu Letter serves as an interim consent/NOC from an existing lender to allow credit disbursement and ROC charge creation, the Pari Passu Agreement is the final, fully stamped and executed legal contract detailing recovery waterfalls, lead bank custody of title deeds, NeSL registration, and joint enforcement rights.
Who holds custody of original title deeds under a Pari Passu Agreement?
Under standard consortium agreements, the Lead Bank acts as custodian and holds all original title deeds, documents of title, and hypothecation deeds on trust for the benefit of all participating member banks.
How are loan recovery proceeds shared under a Pari Passu Agreement?
All realization proceeds from the sale or liquidation of secured movable and immovable assets are distributed strictly in proportion to each bank's outstanding principal and interest exposure (pro-rata basis).
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