1.1.2 Tranches

Each installment of the syndicated loan that is made available to the borrower is funded by a set of participants. Each such installment is known as a Tranche. Therefore, under a tranche, a specified portion (or the entire amount, depending upon the arrangement) of the total loan is made available to the borrower.

The tranche takes the form of a commitment on the part of each of the participants to grant, in principle, the provision of funds for the amount being made available under the tranche. It also involves a commitment on the part of the customer to avail the funds made available under the tranche.

When the terms of a tranche are finalized, the schedules for the actual loans to be made available to the customer under the tranche are also finalized, according to the requirement of the borrower. The participants are directed to fulfil their commitments whenever a schedule is due.

Note:

While creating tranche with facility having Stand By Fee component, Tranche participant balance is validated with facility participant balance.