what are the rules to be follow to give a bank guarantee?



what are the rules to be follow to give a bank guarantee(Bid Security, Security Deposit and performance bank guarantee) like

pl. explain me, i am receiving more job calls about this.

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One Reply to “what are the rules to be follow to give a bank guarantee?”

  1. These guarantees are issued by banks on behalf of contractors in favour of project owners when the contractors undertake a project.

    Bid Bond guarantees are issued at the time of submission of tenders. The bank undertakes that if the contract is awarded to the contractor and if he backs out, a certain amount will be paid by the bank to project owners.

    The project owners demand the contractors to deposit some money as security. In place of security deposit, a bank guarantee is also acceptable.

    In the case of performance guarantee, a bank undertakes that, if the contractor fails to perform his contract, the bank will pay to project owners the loss suffered by them because of failure of the contractor.

    While issuing the above guarantees, banks are undertaking risk. They have to secure them adequately to protect their interests.

    Guarantees are as much risky for banks as advances. Therefore, before issuing guarantees, the banks appraise the proposals in the same way as for advances.

    For issuing guarantees, banks charge fee from the party on behalf the guarantee is being issued.





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