Bank Guarantee

Overview

A bank guarantee is a promise by a bank to pay beneficiary if applicant fails to fulfill their financial and contractual obligations. We offer different types of bank guarantee as per the requirements of its customer. Some of the commonly issued guarantee are: 

Bid Bond (Bid Guarantee or Tender Guarantee)
This type of guarantee is issued by a bank to a beneficiary on behalf and at the request of its customer (Principal) submitting a bid or tender to the beneficiary. It is an agreement guaranteeing the beneficiary that the bidder will enter into the contract if he wins the bid and ensuring compensation if the bidder fails to accept the contract. It is required at the initial stage of inviting Bids/ Quotation/Tender for certain work like Construction/Supply etc.

Performance Bond Guarantee
This type of Guarantees are issued by a bank to a beneficiary on behalf and at the request of its customer (Principal) to whom the contract is awarded by the beneficiary in order to underwrite the contractor’s obligations to complete the project as per the agreement. It is a contractor’s promise to complete the project undertaken. It is required at the second stage after the Bid is accepted and contract is awarded.

Advance Payment Guarantee
An advance payment guarantee is issued where a principal receives money in advance from a beneficiary in order to perform/finance the work as per contract. A bank issues advance payment guarantee to beneficiary on behalf and at the request of its customer (Principal) in order to protect such advance payment made to the principal by the beneficiary. It acts as collateral and protects the beneficiary’s advance payment.

Customs Guarantee /Bonded Warehouse Guarantee
The guarantees issued to the Government of Nepal, Custom Offices for bonded warehouse facility and other purposes are called Custom Guarantee. It is generally issued as security for payment of customs duties by an importer. When goods are entered without payment of customs duty, a customs guarantee is issued. 

Suppliers Credit Guarantee:
A suppliers credit guarantees is issued by a bank on behalf and at the request of the customer (Applicant) in order to supply the goods in credit by the Beneficiary to the applicant. 

Counter Guarantee:
A guarantee issued by a bank at the request of and against counter guarantees of its correspondent bank(s) on behalf of the principal is called counter guarantee. Such guarantee is issued when principal and beneficiary are from two different countries.