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  • Bank Gaurantee Part 1

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    Ajay Finance
    4 views18 pages
    A bank guarantee is a promise by a bank to pay a third party if their client defaults on a payment. It allows a buyer and seller to enter a contract when the seller may not fully trust the buyer to pay. The bank guarantee protects the seller by having the bank pay them instead if the buyer does not pay as agreed. The key parties involved are the buyer, seller, and the bank issuing the guarantee.

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    A bank guarantee is a promise by a bank to pay a third party if their client defaults on a payment. It allows a buyer and seller to enter a contract when the seller may not fully trust the buyer to pay. The bank guarantee protects the seller by having the bank pay them instead if the buyer does not pay as agreed. The key parties involved are the buyer, seller, and the bank issuing the guarantee.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    4 views18 pages

    Bank Gaurantee Part 1

    Uploaded by

    Ajay Finance
    A bank guarantee is a promise by a bank to pay a third party if their client defaults on a payment. It allows a buyer and seller to enter a contract when the seller may not fully trust the buyer to pay. The bank guarantee protects the seller by having the bank pay them instead if the buyer does not pay as agreed. The key parties involved are the buyer, seller, and the bank issuing the guarantee.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 18

    What is Bank Guarantee (BG)?

    Definition
    Bank
    Guarantee
    Promise

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    Buyer (Contracter) Seller(Govt)

    Banker

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee(BG)?

    Underlying Reason
    TRUST

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee(BG)?

    Definition
    Non fund based credit facility like LC but not the same

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    Bank Guarantee (BG)


    1 A buyer in India wants to buy some goods from Seller
    2 But the Seller can’t trust the buyer

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    Bank Guarantee (BG)


    1 Seller thinks that my money may not be paid

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    Bank Guarantee (BG)


    1 It is a financial instrument
    2 It is issued by a bank
    3 Through the financial instrument it becomes a guarantee
    4 Rather the bank pays to the seller in case of default of the
    buyer

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    STEPS
    1 Buyer goes to his Bank

    2 Requests for BG
    3 Seller and Buyer both enter into the Contract
    4 There are only 3 entities

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    Bank Guarantee (BG)


    1 Applicant/Borrower/Buyer
    2 Seller/Govt/
    3 Validity Period (Upto 10 Years)
    4 Specific Amount
    5 Specific Purpose
    6 Collateral

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    Collateral and Charges


    1 Bank Deposits

    2 FD
    3 Charges Fees

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee (BG)?

    Natioanl and International


    1 Company Law

    Legal and Regulatory Aspects of Banking Bank Guarantee


    Advantages of BG

    Advantage is for Seller


    1 Protection against the payment

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee(BG)?

    Bank Guarantee(BG)
    1 Is an arrangement
    2 Bank acting at the request of Buyer
    3 To a third party
    4 By a given date
    5 To a third party (EXPORTER/SELLER/BENEFICIARY)
    6 On the default of Buyer

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee(BG)?

    Parties to the Bank Guarantee(BG)


    1 Buyer
    2 Seller
    3 Bank

    Legal and Regulatory Aspects of Banking Bank Guarantee


    What is Bank Guarantee(BG)?

    Types of BGs
    1 Financial Guarantee

    2 Performance Guarantee
    3 Defereeed Payment Guarantee

    Legal and Regulatory Aspects of Banking Bank Guarantee


    Types of the Bank Guarantee(BG)s

    Financial BG
    1 Against financial loss

    2 Company Bonds (Employer and Employee)

    Legal and Regulatory Aspects of Banking Bank Guarantee


    Types of the Bank Guarantee(BG)s

    Performance BG
    1 Govt Contracts

    Legal and Regulatory Aspects of Banking Bank Guarantee


    Types of the Bank Guarantee(BG)s

    Bid Bonds
    1 Govt Contracts

    2 Earnest Money
    3 Advance Payement Guarantee (10-15

    Legal and Regulatory Aspects of Banking Bank Guarantee

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