Pari Passu Letter
Formal banking document issued by an existing lender to confirm equal ranking of charges for consortium members.
Letter Wizard
Step 1 of 3Legal Binding
Confirm that charges created in favor of new lenders will rank equally ("on equal footing") with existing lenders as per the Inter-Se agreement protocols.
Filing Requirement
Official Instrument Draft
PARI PASSU LETTER
To,
The Manager,
Consortium Banks,
Sub: Pari Passu Letter for ABC Infrastructure Ltd.
Dear Sirs,
Reg: M/s ABC Infrastructure Ltd.
We, State Bank of India, hereby agree and confirm that notwithstanding anything to the contrary contained in or by virtue of the mortgage and charge created by the Company in our favour in respect of the Company's immoveable and moveable properties to secure our Term Loan of INR 500,000,000.00, the mortgage and charge of State Bank of India shall in all respects rank pari passu with the mortgages and charges created/to be created by the Company in favour of:
1. HDFC Bank - Rs. 200 Cr 2. ICICI Bank - Rs. 150 Cr 3. Punjab National Bank - Rs. 100 Cr
We also authorise you to make a mention of the Pari Passu Charge in favour of ourselves and your institution on the assets of the company in the form of particulars of charge required to be filed by the company with the Registrar of Companies.
We undertake and confirm that we shall enter into a Pari Passu Agreement with you defining the rights and obligations of the parties interse.
Yours faithfully,
For State Bank of India
Pari Passu Letter vs. Pari Passu Agreement
Understand the critical distinction between bank-to-bank consent letters and formal consortium agreements.
| Feature | Pari Passu Letter (This Tool) | Pari Passu Agreement |
|---|---|---|
| Legal Nature | Unilateral/Bilateral consent or "No Objection" letter issued by an existing charge-holding lender. | Comprehensive tripartite/multipartite contract executed between Borrower, Lead Bank, and all Member Banks. |
| Primary Purpose | Enables immediate credit facility disbursement and provisional ROC charge creation (Form CHG-1). | Defines permanent, binding contractual covenants on security ranking, title custody, and liquidation sharing. |
| Parties Involved | Issued by one bank to another co-lender / Lead Bank. | Signed by the Corporate Borrower, Lead Bank, and all Participating Consortium Lenders. |
| Stamping & Registration | Standard bank letterhead or nominal state stamp paper. | Properly stamped agreement registered under State Stamp Act and NeSL DDE framework. |
| Recovery Waterfall | Contains basic agreement to share charges equally. | Sets out exhaustive waterfall protocols for distribution of asset realization proceeds strictly pro-rata. |
FAQs on Pari Passu Letters
Practical guidance for credit officers, relationship managers, and consortium documentation teams.
What is a Pari Passu Letter in banking?
A Pari Passu Letter (also known as a Letter of Cession or Pari Passu Consent Letter) is a formal communication issued by an existing charge holder (e.g., Lead Bank or co-lender) confirming that it agrees to share its charge on the borrower's secured assets on an equal (pari-passu) footing with incoming or other member banks.
What is the difference between a Pari Passu Letter and a Pari Passu Agreement?
A Pari Passu Letter is an interim consent/NOC exchanged bank-to-bank to facilitate immediate credit disbursement and ROC Form CHG-1 charge modification. In contrast, a Pari Passu Agreement is a comprehensive, legally binding multipartite contract executed between the Borrower, Lead Bank, and all Consortium Lenders specifying detailed recovery sharing covenants, title deed custody, and default enforcement rules.
When is a Pari Passu Letter required?
It is required whenever a corporate borrower avails new or enhanced credit facilities from another lender or consortium member, requiring existing lenders to confirm in writing that new credit facilities will rank pari-passu without prior charge claims.
Is a Pari Passu Letter legally binding?
Yes, it binds the issuing lender to concede priority and agree to share charges equally, but lenders must subsequently execute a formal registered Pari Passu Agreement for complete legal security enforcement.
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