A Letter of Guarantee Facility issued by a bank is a written promise/ irrevocable obligations by the bank to compensate (pay a sum of money) to the beneficiary (local or foreign) in the event that the obligor fails to honor his/her/its obligations in accordance with the terms and conditions of the guarantee/agreement/contract.
The CBE may extend a one-time or renewable Letter of Guarantee Facilities:
- A one-time Letter of Guarantee Facility is a non-renewable letter of guarantee extended to applicants who have no recurrent requests.
- Renewable Letter of Guarantee Facility is a form of credit facility where the limit is renewed periodically when the customer fulfills the Bank’s requirement. The Bank may avail the facility to customers who have recurrent requests.
Any Letter of Guarantee Facility request shall require full collateral coverage.
Clik here to read about the Types of Letter of Guarantee.
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