09 February 2014
Dear Nilesh, Bank Guarantee is a guarantee given by bank on behalf of us to third party as an assurance to the fact that if we do not perform our contractual obligation, such BG will be invok e.g. while applying for tender you have to provide for BG of Rs.2 cr., so will provide a security of Rs.2cr to issue BG to your customer. If you perform your part of contract then BG will not be invoked and bank will charge BG Charges only. If you fail to perform your contract terms, then such BG will be invoked and then bank will pay such sum to 3rd party and also realise the security given for BG by you. Hope this will help you.
CAclubindia
