Bank Guarantee Application: Fill & Download for Free

Both of these are contingent liabilities. That means a non fund based advance which can be changed to fund based respect to certain conditions mentioned therein.A bank guarantee is a promise for non-performance. In bank guarantee, a bank guarantees any work that has to be performed failing which the bank promises to pay the dues.A letter of credit on the other hand is a promise for performance. It promises the beneficiary that the payment will be made in time and in full, subject to conditions mentioned in the lc.An example can be a tender for construction of bridge. A bank can give a bank guarantee at the time of bidding in the tender, that the applicant will construct the bridge after tender is rewarded. On the other hand letter of credit can be issued by the bank if the same person wants to procure raw materials on credit, promising the creditors that the payment will be made by the person, if not, the bank will pay.

Problem is that most loans taken by companies of Anil Ambani not by Anil Ambani. These loans are business loan not personal loan. Business loans are given to the businesses by evaluating their business prospective irrespective of their owner. There is no personal guarantee applicable to business loan unlike personal loan.Like common people take home loan or car loan. If common people fail to pay the loan than banks legally capture the home or flat or car. By selling it, bank recover loan dues. But banks does not comes to the person house to occupy his personal belongings like his wife's gold jewellery or his investment in share market etc. Because banks give loan agaist that house or car. But if the common man takes personal loan and he unable to pay it. Than situation would be different.Similarly Anil Ambani does not taken that Rs. 80,000 crores personal loan but it's business loan, which given agaist their companies. So banks cannot ask Anil Ambani to sell his house. Nor Anil Ambani will do it. Now a days many common people are not able to pay their home or car EMIs. I know many cab owners are not able to pay EMI due to lock down and work from home culture. But they are not paying the bank loan by selling their belongings like jewellery.Moral ground and law should be same for both rich and common people.

Bank guarantee: It is an agreement between three parties i.e. the bank, the beneficiary and the applicant. The beneficiary is the one to who takes the assurance and the applicant is the party who seeks the bank guarantee from the bank. It is an important banking agreement and plays an imperative role in promoting worldwide and domestic trade.How is it different from a letter of creditBank guarantee: It reduces the loss if the transaction doesn’t go as planned. And the guarantees are the sum of money to beneficiary, which is only paid if the opposition party does not fulfill the stipulated obligations under the contract.Letter of credit: It ensures that a transaction proceeds as planned and obligation taken on by a bank to move a payment once certain criteria are met. Once these terms are completed and confirmed, the bank will transfer the funds.A Bank Guarantee is similar to a Letter of credit in that they both instill confidence in the transaction and participating parties. However the main difference is that Letters of Credit ensure that a transaction goes ahead, whereas a Bank Guarantee reduces any loss incurred if the transaction does not go to plan. A bank guarantee and a letter of credit are both promises from a financial institution that a borrower will be able to repay a debt to another party, no matter what the debtor's financial circumstances.