Amendment clause in a bank loan


What is Amendment clause in a bank loan? What do I need to check for any such clause in my bank loan agreement?



Banks and other financial institutions that grant loans often include an amendment clause to retain rights of amending the terms and conditions of the agreement unilaterally without the permission of the borrower who is the second party to the agreement.

A typical amendment clause line to watch out for is “the bank shall at its sole discretion alter the terms of this agreement by written intimation sent to the borrower by courier. Any amendment proposed by the borrower shall be valid only if made by a written agreement signed by both the parties.” This clause is completely unacceptable by any legal standards and hence must be out rightly rejected while signing the agreement. The implications of the amendment clause are completely against the interest of the borrower who is an equal party in a loan agreement.

Great care should be taken at the time of signing the agreement to scrutinize the document for such ambiguous and tricky clauses that may compromise the interest of you, the borrower, later. In case you find any of these clauses unacceptable you could reject the agreement or renegotiate for an appropriate one with the bank or financial institution.

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BB Expert