Banking Fundamentals Training

SESSION-14

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

BANK GUARANTEE

OVERVIEW

• Bank guarantee is an instrument issued by the bank in which the bank agrees to stand against the non-performance of some action of the party

• The quantum of guarantee is called the “Guarantee Amount”

• The Guarantee is issued at the request of an applicant

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

BANK GUARANTEE

OVERVIEW

• It is issued for some purpose/transaction in favour of a “Beneficiary”

• Upon non-performance, the Guarantee amount is paid by the “issuing Bank” to the “Beneficiary” upon receipt of the “Claim” From the beneficiary

• The claim results in “Invocation” of the Guarantee

• In most cases, guarantees may not be invoked at all

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

BANK GUARANTEE

CONCEPTS

• Guarantees are issued for a specific period and against some security and some margin.

• Commission is collected either up-front for the whole period of guarantee or collected periodically

• Guarantees constitute “Contingent Liability” for the issuing Bank

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

BANK GUARANTEE

CONCEPTS

• Such transactions are passed at the time of issue and reversed either at the time of cancellation or invocation

When guarantee is invoked, the same has to be paid either by debiting operative a/c of the applicant or by creating a loan a/c of bank’s internal account

The loan has to be subsequently recovered from the applicant.

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

BANK GUARANTEEBANK GUARANTEE

TYPE OF GUARANTEES

• Performance Guarantee• Financial Guarantee• Bid Bond Guarantee• Shipping Guarantee• Deferred Payment Guarantee• Advance Payment Guarantee• Acceptances & Co-acceptances• Solvency Certificates

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

BANK GUARANTEEBANK GUARANTEE

FURTHER CLASSIFICATION

• Guarantees issued favouring Government

• Guarantees issued to Others

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

BG/DC Charges Amortization ProcessCAM17

Guarantee PrintingGP16

Statement of GuaranteeBGSTMNT15

BG Margin PrintingBGMARGIN14

Guarantee LIMITBGLIMIT13

Guarantee CloseBGCLOSE12

Guarantee Overdue ChargesGODCH11

Statement of guaranteePRR11C10

Monitoring of guaranteesPRR11B9

Quarterly statement of guaranteePRR11A8

Guarantee issued and liability registerGILR7

Deferred payment guarantee register printDPGR6

Printing of guaranteeBGPRINT5

Guarantee inquiryGI4

Inward Guarantee Master Maintenance IGMM3

Guarantee master maintenanceGMM2

Guarantee parameter maintenanceGPM1

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BANK GUARANTEE

Universal Banking Solution from InfosysConfidential and Proprietary to Infosys Technologies Limited

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