How to invoke a Performance Bank Guarantee form the Bank


Dear Members,

Could anyone please explain the proceedure for invoking the Performance Bank Gaurantee from the Bank?

Thanks in advance


Dear Sir,

The first & foremost ground for invocation of BG shuld be read thoroughly to know on which circumstances it  can be invoked.

Generally in the commercial transaction if there is any deviations certainly issue a letter to banker quoting the clause for their reference as such BG amount can be invoked.

It can be sent by fax /RPAD/Courier to banker(guarantor)  who has issued the BG within 3 working days the bank to honour and credit  the amoun to your account.

Trusting this would suffice you, if not pls. feel free to revert.





Good advise by Mr. Sateesh.


Sent a letter to the concerned banker for invoking BG. Generally the BG does not contaion any condition, means a BG is un conditional and you can invoke it any time (for this purpose read your BG). The banker will pay to you the BG amount after completion of formalities which differs from bank to bank.

reitred bank executive

Dear Sir,

There are two types of Bank Guarantees

1. Perofrmance Guarantee

The performance Guarantee means, the Guaranteeing party will give guarantee for execution of a particular happening of the incident/transaction or any other thing which is good in the eye of law. for example  a) construction of a Building/dam/bridge, b) Supply and erection of machinery . Here the liability of the person is to perform the incident/job/transaction not the financial liability.

2. Financial Gurantee

In Financial guarantee what ever may be the underlying happening of the incident/transaction, if on account of non happening of the incident it ends with financial liability on the person who guarantees.

All the terms/covenants of the Bank Guarantees have to be accepted by all the parties to the guaranees ie.,

1. Applicant  2. Beneficiary of the Bank Guarantee ( In whose favour the Bank Guarantee is issed) and 3. Banker who executes the bank guarantee.

Normally the bankers do not execute the Performance Guarantee. Beccaue they are not experts in executing the particular/various types of jobs/transactions etc. In General most of the guarantees ends with financial liability only.

On the assumption that it is Performance Guarantee ending with financial liability I opine like :

a) The covenants/Terms are enumarated in the Bank Guarantee executed by the Bank reveals that how that particular guarantee to be invoked. Generally they are 1. By sending a letter in Regd with ack due 2. Servicing a invoking letter on the Bank in person or any other means as agreed.

2) The invoking letter may be a simple letter addressed to the bank will be that  of  stating " as the some/many of the terms and conditons of the original underlying contract/agreement have not been fulfilled we are invoking the guarantee". Finally the beneficiary may request the banker to send the invoked amount by means of Draft/RTGS/EFT to his account.

Normal condition/ covenant in the Bank Guarantee is that - by mere asking the amount bank has to make payment of the invoked amount.

Therefore Banks are required to make payment by mere invokation letter. Some times the bankers needs a certificate/declaration that the invoked amount is final and the liability under the said bank guarantee is satisfied. They may also ask to send back the original bank guarantee issued by them for their records.

With regards,

MRR Gupta




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