Comment on the following: Loan syndication is one of the project finance services.

Loan syndication involves obtaining commitment for term loans from the financial institutions and banks to finance the project. Projects require large amount of initial outlay with long gestation periods. Considering the risk and the size of the loan, a number of banks participate together in funding such proposals. Loan syndication is therefore a tie up of term loans from the different financial institutions. Merchant Bankers facilitate the companies in arranging and procuring credit from financial institutions, banks and other lending and investment organisations for financing the client project cost or working capital requirements. The process of loan syndication involves the formalities such as preparation of project details, preparation of loan application, selection of financial institutions for loan syndication, issue of sanction letter and letter of intent from the financial institutions, compliance of terms and conditions for the availment of the loan, documentation, and disbursement of the loan. The public financial institutions require the borrower to submit the requisite information for the loan in the prescribed forms along with the project report which is thoroughly scrutinized by them at individual levels and discussed in the inter-institutional meetings. After the officers of the institutions satisfy themselves of the viability of the project, the proposal for the loan is submitted to the sanctioning authority and it is after this sanction the formal letter of intent is issued to the borrower.