Difference between Consortium Banking and Multiple Banking

Last updated by BankersClub on March 13, 2018

Difference between Consortium Banking and Multiple Banking is explained in this article

What is Consortium Banking or lending under Consortium arrangement?

Under consortium banking arrangement, more than one bank provides finance to a single borrower but chose one of the lender (having highest share) as consortium leader. Regular meetings are arranged by leader bank to discuss various issues related to the particular finance.

Quantum of finance is decided in the consortium meeting (Maximum Permissible Bank Finance in case of working capital or the amount of term loan in project financing) The share of each consortium member (bank) is also decided in Consortium Meeting. Suppose MPBF is arrived at Rs.500 crores banks may agree to finance as Bank A (leader) Rs.200 Crores, Bank B Rs.150 Crores and Bank C, D, E Rs.50 crores each.

Also Read ‘What is working Capital‘ and ‘Appraisal of Term Loan

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Appraisal of Loan:

The appraisal of the loan is done by the consortium leader or jointly in consultation with member banks.



There is common documentation, which are being executed by leader bank on behalf of all member banks.


Supervision and follow-up

Supervision and follow-up is done jointly however, most of the aspects are being taken care by leader bank.

Stock Statements (if working capital finance) are submitted by the borrower to the leader bank, who allocate Drawing Power (DP) to other member banks. Leader bank is also responsible for getting the stock audit of the borrower done as decided.

Visits to the project site or stock verification are undertaken jointly or individually as decided between the banks.


Charge on Assets & Collateral Security

All the member banks will hold pari-pasu charge on primary as well as collateral securities. Leader bank will file charge with ROC.


Mortgage of IPs

Title deeds (and other documents required for mortgage) are kept by leader bank and Mortgage of IPs (whether primary or collateral security) is created by leader bank.

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What is Multiple Banking? How Consortium Banking is different from Multiple Banking

In case of multiple banking also various banks finance to a single borrower but there is no formal arrangement between the lender banks.

 All the banks appraise loan independently, determine quantum of finance, and borrower execute documents with each bank separately.

 Each bank independently supervise the account.

 There may be separate securities (primary or collateral) or some lenders may share charge (pari-pasu or otherwise).

 Mortgage is created by each bank separately in respect of securities offered to respective bank.

However, banks financing a borrower under multiple banking arrangement (although there is no arrangement between the banks) are required to share information in respect of the account on regular basis.


What is better way of financing Consortium Banking or Multiple Banking?

From the bank’s point of view, consortium banking is better as it facilitate better control and supervision over the account.

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