A Bank guarantee means giving something as MSME Collateral or security. It is an agreement made by the banks to the third-party to accept the risk of payment in place of their applicant. Bank guarantee gives on the sanctioned commitment between an applicant and the Banks.
It is a pledge by the banks between the two parties i.e., buyers and the sellers. The bank guarantee assists as a risk management device for the receiver. Such guarantees by banks are extensively used in Personal Loan transactions and Business Loan to defend third party from financial losses. It works as a key basis for small business.
Bank guarantee is the amount of money paid to the lender for Mortgage-Backed Security (MBS) by the buyer. Basically, bank guarantees are built on the risk expected by the banks in every transaction. According to the type of bank guarantee monetary worth, fees are charged once in a quarter on the value of guarantee 0.75% to 0.50% during the validity period. It is charged by further guarantors for service provides. Also, the banks might charge the processing fee for application, handling fee, documentation fee.
- Performance guarantee
- Financial guarantee
- Bid Bond guarantee
- Foreign bank guarantee
- Deferred payment guarantee
- Advance payment guarantee