Bank Guarantee - How much % FD need to be putted?

[Danish Azfar]

Hi Experts,

Can you please let me know the procedure for getting the bank guarantee from the bank? For example, how can a bank guarantee be availed through FD? or any other way also?

If FD, then how much % of the FD for the Bank Guarantee?

Are all banks following the same procedure and % of FD, or does it vary from bank to bank?

Please clarify.

[YAGAY andSUN]

A Bank Guarantee may be obtained by submitting a formal application to the concerned bank along with the requisite documentation, including but not limited to KYC documents, details of the underlying contract or obligation, and any additional financial or business records as may be required by the bank. Upon receipt of the application, the bank shall undertake its internal appraisal and credit assessment to determine the applicant's eligibility and the nature of security or margin to be provided prior to issuance of the Bank Guarantee.

In cases where the Bank Guarantee is sought against a Fixed Deposit (FD), the bank ordinarily requires the creation of a lien over the FD in favour of the bank for an amount equivalent to or exceeding the value of the proposed guarantee. Typically, banks require a margin ranging between approximately ninety percent (90%) to one hundred ten percent (110%) of the guarantee amount, though in most instances a one hundred percent (100%) FD cover is maintained. The tenure of the Fixed Deposit is generally required to be co-terminous with, or longer than, the validity period of the Bank Guarantee.

The margin requirements, documentation, commission, and procedural formalities for issuance of a Bank Guarantee are governed by the internal credit policies of the respective bank and therefore may vary from bank to bank. While many banks follow broadly similar practices, the exact percentage of FD margin, applicable charges, and approval procedures are determined at the discretion of the issuing bank in accordance with its prevailing rules, regulatory guidelines, and risk assessment policies.

AI Summary

Bank guarantee security through fixed deposit requires bank appraisal and lien over deposit; margins and charges vary by bank. A bank guarantee is issued after formal application, KYC submission and the bank's internal appraisal determining eligibility and security. When secured by a Fixed Deposit the bank ordinarily places a lien on the FD for an amount at or above the guarantee and requires the FD tenure to be co terminous with or longer than the guarantee. Margin levels, charges and procedures are governed by each bank's internal credit policy and may vary between banks.