The obligations of a borrower are the legally enforceable commitments that a borrower assumes when entering into a loan agreement, bond indenture, or other debt contract — defining what the borrower must do to remain in compliance with the terms of the credit facility and avoid default. Key borrower obligations typically include: payment obligations (making timely interest payments and principal repayments according to the agreed schedule), financial covenants (maintaining specified financial ratios such as debt-to-equity, interest coverage, and current ratio above minimum thresholds), information obligations (providing regular financial statements, audit reports, and other disclosures to the lender), maintenance obligations (keeping pledged collateral in good condition and properly insured), negative covenants (restrictions on actions such as additional borrowing beyond specified limits, dividend payments above defined thresholds, or sale of key assets without lender consent), and cross-default clauses (where default on any other significant debt obligation triggers a default under the current loan agreement). In India, borrower obligations are codified in facility agreements negotiated between the company and its lenders — with covenants enforced by both the lender and, in the case of listed company bonds, under SEBI's LODR framework requiring timely disclosure of covenant breaches. Failure to meet borrower obligations — particularly payment defaults — triggers the lender's right to accelerate the debt (demand immediate repayment), enforce security interests, and initiate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), 2016.
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