Bank guarantee is the guarantee which is given by bank to its customer. Same guarantee can be used by customer for promoting his or her business or getting debt from private organizations.
It comes under contract act. Bank guarantee is the contract between bank and its customer. As per this contract, if his customer will unable to pay his debt to outside creditor. Bank will pay. Bank will give bank guarantee on the basis of fixed deposit of customer. If customer has Rs. 10,00,000. Bank can easily give bank guarantee in written of Rs. 5,00,000. If his customer will unable to pay Rs. 5,00,000 to outside. Bank will pay and deduct Rs. 5,00,000 from his FD of Rs. 10,00,000. This contract will be done on the certain conditions.
Parties under Bank Guarantee
1. Bank Or Guarantor
2. Principle Debtor
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