Non Fund Facilities BG/LC

Under fund based lending by the Bank ,there is immediate outgo of funds . In non fund based lending there is  no immediate outgo of funds and the amount committed become payable /funded.

Bank Guarantee  :   Bank guarantee is a “letter of guarantee”  is issued by the Bank ,at the request and on behalf of a customer in favour of the beneficiary who may be company /firm /individual /Govt department) committing to pay on behalf of a customer a certain sum of money if demanded within a specified period in terms of this guarantee letter,for non discharge of a financial obligation or for non performance of a contract as per term of the  contract between the customer and the beneficiary .Various types of guarantees offered are – financial, performance, bid bond, tenders, customs, etc.

Letter of Credit  :  A definite undertaking on the part of the Bank to make payment to the supplier of the goods (the beneficiary of the letter of credit) on submission of the documents as stipulated and on fulfillment of the terms and condition of letter of credit. This is a mechanic to settle the payment in trade. The seller controls the ownership of goods till the buyer pays to a Bank as agent of the seller . The buyer pays only when he gets proper documents as per his needs as stipulated in the latter of credit

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