BANK GUARANTEE - INTRODUCTION

Bank guarantee is a promise from bank or any  finanacial institution that they will honour  the  agreed finanacial  obligation incase the clinet not full fill the same. It is actually a facility provided by banks to it’s clients  and this facility have some agreed  maximum limit say 1 million or 2 million etc.

Bank Guarantee  issuing  for a specific period of time. For eg  3 months, 6 months , 1 year etc… or up to certain specific date (  eg.up to 31march 2017 ). Once the bank guarantee completed  it’s  validity period or maturity period, then such bank guarantee required to  renewed for further period  , if  required.

Once the validity of bank Guarantee expired, then such Bank Guarantee have no legal validity and the holder of that bank guarantee can’t claim to the bank for the  guaranteed amount  for  the breach of duty  or non performance from client. So validity of bank guarantee is one of the most important thing while maintaining a bank guarantee.

Bank guarantee should be for a specific person. That means in the bank guarantee it’s self mention the name of the ‘’beneficiary of the bank guarantee ‘’. So only that specific beneficiary can claim for the guaranteed amount from the bank.

Advance payment bank Guarantee,  Performance Bank Guarantee,  Retention bank guarantee, Tender Bond etc are some of the commonly used bank guarantees.

Each type of bank guarantees are used for separate specific purposes. 

Examples:-

1)Tender Bonds used for submitting tenders for getting any new contract  or project.

2)Advance Payment Bank Guranatee  used as a security against Advance Amount paid.

3)Performance Bank Guatantee used as a security  for the proper performance of the contract or delivery of goods.

4)Retention Bank Guarantee used as a security for the earlier  release of retention money .