Bank Guarantee Process for Accounting

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Executive
207 Points Joined October 2020

HI ALL

 

CAN SOME ONE PLEASE EXPLAIN THE PROCESS OF BANK GAURANTEE

i;e  THE BANK ASK FOR 25 % MARGING AND 75 % FUNDED BY BANK  WHAT EXACTLY IT MEANS 

 

SECONLY THE SAY ITWILL BE EPT AS FD FOR THE AMOUNT AND WILL EARN INTEREST 

 

WHAT IFTHE BG IS UNPAID AFTER EXPIRY  WHAT WILL BE ENTRY FOR REVERSAL OF 25 % MARGING AND FOR THE FD INTERESRT EARNED

 

LETS SAY BG AMOUNT IS FOR RS 100000 AND I HAVE GIVEN 25 % BANK MARGING 

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On 21 August 2024 at 10:26 Report
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online

Master in Accounts & high court Advocate
9113 Points Joined December 2011

When a bank asks for a 25% margin and 75% funding, it means: - _Margin (25%):_ The bank requires you to pay 25% of the total amount (e.g., loan or credit facility) as a down payment or security deposit. This amount is not financed by the bank and is typically paid upfront. - _Funded by bank (75%):_ The bank will provide 75% of the total amount, which means they will lend or finance 75% of the total amount. For example: - Total amount: $100,000 - Margin (25%): $25,000 (paid by you) - Funded by bank (75%): $75,000 (provided by the bank) In this scenario, you would need to pay $25,000 as the margin, and the bank would provide $75,000, totaling $100,000. This is a common arrangement in various financial transactions, such as: - Loans (e.g., home loans, business loans) - Credit facilities (e.g., overdrafts, lines of credit) - Project finance - Working capital finance The bank's requirement for a margin and funding ratio may vary depending on factors like creditworthiness, risk assessment, and regulatory requirements.

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On 21 August 2024 at 15:02
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Executive
207 Points Joined October 2020

Thank you Rama chari your explanation was crystal clear 

So when we do 25 % fuding  they will do FD equal for that amount right andpay us with interest  when the BG exres and its not invoked 

and when bank does fundng on 100 % marging we dont have option for FD and ban will staright charge thei ban commision 

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On 22 August 2024 at 09:29


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