Bank Guarantee (MT- 760) is an irrevocable commitment issued by a bank on behalf of their customer who has entered in a contract to purchase goods from a supplier and promised to meet all financial obligations to the supplier in the event of default. In other words, a Bank Guarantee is an undertaking of a bank on behalf of its customer.
A Bank Guarantee often helps firms conduct their business with parties they would never normally get the chance to deal with. Many suppliers will often choose to do business with customers that have a Bank Guarantee because it eliminates the risk that they will not receive the appropriate payment for the goods that they are selling.
Bank Guarantees are issued for a variety of purposes, such as to improve the credit ratings for issuers of industrial development revenue bonds and commercial papers; to provide back-up facilities for loans granted by third parties; to assure performance under construction and employment contracts; and to ensure the account party satisfies financial obligations payable to major suppliers.
Types of Bank Guarantee:
Below are the step by step procedures to obtain Bank Guarantee from BWT :
1. Buyer submits requirement in terms of pro-forma invoice or buy and sell agreement of their trade deal to BWT.
2. BWT carries due diligence of their commercial transaction between buyer & seller and will inform the concerned parties about the approval or rejection of their BG application.
3. Once the BG application is approved then the buyer will provide certain documents and pay the BG issuance fee charges.
4. BWT will immediately act and will provide from their bank account with European Bank the required BG on behalf of buyer & in favor of their supplier to conclude their trade deal.