Open ended Guarantees: These guarantees do not have an expiry date and a standard liability clause and return clause.
Close ended Guarantees: These guarantees have an expiry date and a standard liability clause and return clause.
SBP Circular regarding issuance of Open ended Guarantees
| BPRD Circular No.07 | April 04, 2000 |
|
| All Banks, OPEN ENDED GUARANTEE-ISSUANCE OF
| | In terms of BCD Circular No. 5 of 1983, it was, interalia, directed that all guarantees issued by banks must contain specific amount and expiry date and a date by which claims are to be lodged. Banks are presently allowed by the State Bank to issue open ended guarantees on case by case basis, provided such guarantees are fully secured by cash collateral. With a view to facilitate the banks to issue such guarantees in situations where it is an integral part of the business, it has been decided to allow banks to issue open ended guarantees without clearance from the State Bank, provided banks have fully secured their interest by cash collateral or other liquid securities against issuance of such guarantees for the following purposes:- -
Advance payments/bid bond guarantees- guarantees against performance of ongoing Government, Semi Government & Autonomous Bodies Contracts. -
Guarantees requested by public utility companies such as gas, electricity etc. in respect of their customers to cover the utility supplied during the period of guarantee. -
Court Guarantees. -
Customs/Shipping guarantees -
Revenue related Government Departments’ guarantees. Banks may continue to seek prior approval of State Bank of Pakistan for issuance of open ended guarantees for purposes other than the ones mentioned above, on case by case basis. | |
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