What is bank guarantee?
Bank Guarantee (BG) is an agreement between 3 parties viz. the bank, the beneficiary, and the applicant. The beneficiary is the one to who takes the guarantee. And the applicant is the party who seeks the bank guarantee from the bank. BGs are an important banking arrangement and play a vital role in promoting international and domestic trade.
What do you need to apply for a bank guarantee?
Typical applications stipulate a specific period of time for which the guarantee should be valid, any special conditions for payment and details about the beneficiary . Sometimes the bank requires collateral. This can be in the form of a pledge agreement for assets, such as stocks, bonds, or cash accounts.
Can I use a foreign bank as a guarantors?
Many countries do not accept foreign banks and guarantors because of legal issues or other form requirements. With an indirect guarantee, one uses a second bank, typically a foreign bank with a head office in the beneficiary’s country of domicile. Because of the general nature of a bank guarantee, there are many different kinds: