Bank Guarantee & Letter Of Credit

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Sachin Sabale (Querist)
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17 February 2010 Dear Mates

Can u explain What is bank Guarantee & Letter of Credit? what is the difference in both? where can i get detail information of this?

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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17 February 2010 mr sachin sabLE,

WILL U PROVIDE YOUR EMAIL

ramesh.arti@yahoo.co.in

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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17 February 2010 A bank guarantee and a letter of credit are similar in many ways but they're two different things. Letters of credit ensure that a transaction proceeds as planned, while bank guarantees reduce the loss if the transaction doesn't go as planned.

A letter of credit is an obligation taken on by a bank to make a payment once certain criteria are met. Once these terms are completed and confirmed, the bank will transfer the funds. This ensures the payment will be made as long as the services are performed.

A bank guarantee, like a line of credit, guarantees a sum of money to a beneficiary. Unlike a line of credit, the sum is only paid if the opposing party does not fulfill the stipulated obligations under the contract. This can be used to essentially insure a buyer or seller from loss or damage due to nonperformance by the other party in a contract.

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