CA Guru M (B.com, CA, CS) (1552 Points)
08 May 2010What Does Bank Guarantee Mean?
A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it .
A bank guarantee is a written contract given by a bank on the behalf of a customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in case,if it is not paid by the customer on whose behalf the guarantee has been issued. In return,a bank gets some commission for issuing the guarantee. Any one can apply for a bank guarantee, if his or her company has obligations towards a third party for which funds need to be blocked in order to guarantee that his or her company fulfils its obligations (for example carrying out certain works, payment of a debt,etc.).
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