Executive Summary
- Disbursement follows sanction but is not automatic or immediate for term loans tied to project milestones
- Ongoing obligations include AGF, stock statements, and annual financial submission
- The bank continues monitoring the account well after disbursement, not just at sanction
- Most post-sanction problems are administrative oversights, not financial distress
From Sanction Letter to Disbursement
Receiving your sanction letter is a major milestone, but it is not the same as having funds in hand. For working capital limits, disbursement is typically straightforward once documentation formalities — loan agreement execution, hypothecation documentation — are complete. For term loans tied to a specific project, disbursement is usually tranche-based, released against documented progress: equipment invoices, construction milestones, or installation certificates, rather than as a single lump sum.
Your Ongoing Compliance Obligations
- Annual Guarantee Fee (AGF) — due annually on the sanction anniversary; see our detailed AGF guide for rates and consequences of non-payment
- Stock and debtor statements — for cash credit limit holders, typically submitted monthly, used by the bank to calculate your drawing power
- Audited annual financials — submitted to the bank each year, used to reassess the facility at renewal
- Notification of material changes — any change in business address, constitution, or management should be reported to the bank promptly
What the Bank Monitors After Disbursement
Banks do not disburse and disappear. Ongoing monitoring typically includes periodic review of DSCR performance against original projections, stock audit visits for working capital accounts, and annual renewal assessment for cash credit limits. A business that consistently underperforms its own projections without communication to the bank can find its facility downgraded or scrutinised at renewal, even if repayment has been regular.
Common Post-Sanction Mistakes Borrowers Make
The most frequent post-sanction failure we see across Karnataka clients is treating sanction as the end of the relationship rather than the beginning of an ongoing one. Missed AGF payments, late stock statement submissions, and silence around underperformance against projections are all administrative — not financial — failures, and all are entirely avoidable with basic calendar discipline. Businesses that maintain proactive communication with their bank, even when results lag projections, generally fare far better at renewal time than those that go quiet.