Bank guarantee
Features & Benefits
A guarantee is a contract to perform the promise or discharge the liability of a third person in case of default. There are three parties to a guarantee. The person who gives the guarantee is called the 'Surety' or 'Guarantor'; the person on whose behalf the guarantee is given is called the 'Principal Debtor' and the person in whose favour the guarantee is given is called the 'Creditor' or 'Beneficiary'.
The Bank issuing the guarantee is the guarantor, the customer on whose behalf the guarantee is issued is the principal debtor and the third party in whose favour the guarantee is issued is the beneficiary.
Bank guarantee can be sanctioned to cover a single transaction or to a series of transactions. Guarantee which extends to a series of transactions is called a continuing guarantee. In certain cases, instead of accepting earnest money deposit for each work, Government Departments may seek bank guarantees issued for a specific period. This is an example of continuing guarantee.
Types of Bank Guarantees
Financial Guarantees
Financial guarantees are direct credit substitutes wherein bank irrevocably undertakes to guarantee the repayment of a contractual financial obligation.
An indicative list of financial guarantees provided by us are given below.
a) Guarantees for credit facilities
b) Guarantees in lieu of repayment of financial securities
c) Guarantees in lieu of margin requirements of exchanges
d) Guarantees for mobilisation advance, advance money before the commencement of a project and for money to be received in various stages of project implementation
e) Guarantees towards revenue dues, taxes, duties, levies etc. in favour of Tax/ Customs / Port / Excise Authorities and for disputed liabilities for litigation pending at courts
f) Credit Enhancements
g) Liquidity facilities for securitisation transactions
h) Acceptances (including endorsements with the character of acceptance)
i) Deferred payment guarantees
Performance Guarantees
Performance guarantees are essentially transaction-related contingencies that involve an irrevocable undertaking to pay a third party in the event the counterparty fails to fulfil or perform a contractual non-financial obligation.
An indicative list of performance guarantees provided by us are given below.
a) Bid bonds
b) Performance bonds and export performance guarantees
c) Guarantees in lieu of security deposits / earnest money deposits (EMD) for participating in tenders
d) Retention money guarantees
e) Warranties, indemnities and standby letters of credit related to particular transaction
Rates & Charges
Please refer Rates & Charges Page.
Explore Other Trade Finance Services
Bank guarantee (BG) is used to strengthen and/or secure an obligation under a commercial contract. Customers can apply to the Bank to issue BG in favour of a Beneficiary.
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