Types of Bank Guarantees

Choose the Right Guarantee

Each type of Bank Guarantee serves a specific purpose. Here's what you need to know.

A commitment that the applicant will fulfill contractual obligations. If the applicant fails to perform, the beneficiary can invoke the guarantee.

Common Use Cases

Construction & infrastructure projects Government contracts Manufacturing agreements Service delivery contracts

Typical Amount

5-10% of contract value

Validity Period

Contract duration + claim period

Guarantees payment of a specified amount to the beneficiary. Used when financial obligations need backing from a bank.

Common Use Cases

Credit facilities Deferred payment arrangements Trade finance Customs & excise duties

Typical Amount

As per payment obligation

Validity Period

As per payment schedule

Protects the buyer when advance payment is made. Ensures refund if the supplier fails to deliver goods or services.

Common Use Cases

Equipment procurement Import payments Project mobilization advances Material procurement

Typical Amount

Equal to advance amount

Validity Period

Until delivery/completion

Ensures the bidder will honor their bid if selected. Protects against withdrawal of bids after submission.

Common Use Cases

Government tenders PSU contracts Infrastructure projects Defense contracts

Typical Amount

1-5% of bid value

Validity Period

Until contract award