Bank Guarantee

Banks guarantees are written obligations of the issuing bank (MBNL) to pay a sum on to a beneficiary on behalf of its customers in the event that the customers themselves do not pay the beneficiary. Through such guarantee letters, MBNL undertakes responsibilities to provide fund (guarantee amount), following a default by you of your contractual or other obligations.

Letters of Guarantee can be in the form of Bank Guarantees, Performance Bonds, Bid Bonds, Shipping Guarantees, Advance Payment Guarantees, Counter uarantees etc.

• Secure customers entering into bids, sales contracts, and tenders.
• Fulfillment of contracts with counterparties, based on the guarantee terms.

• MBNL issues, amends, extends, and liquidates guarantees, all based on customer's requests.

1. Bid Bond (tender bond)

As the name implies, performance bonds are a means of guaranteeing the performance of a company to live up to what it is promising to do. This also applies to any subcontractors or material suppliers that company may employ. All parties must adhere to certain cost, time, and quality criteria based on what they've been contracted to produce.     

This guarantee is asked for by the beneficiary once it has elected a party to perform a certain task. In case the terms and conditions are violated by the customer, the beneficiary will invoke the guarantee and will obtain compensation for his loss.

Some contracts require that some percentage of Advance payment be made against the contract awarded. In such cases the Buyer or the employer may seek an advance payment guarantee from the bank with an undertaking to pay the guaranteed sum to the buyer if the contractor has failed to comply with the terms and conditions of the contract.

For foreign bidders, who intend to participate in tenders or intend to enter into a contract in a project of Nepal must submit a guarantee acceptable to the beneficiary. In that case, the foreign party obtains a guarantee from the bank (acceptable to MBNL) in favor of MBNL, which in turn will issue a guarantee on behalf of the foreign party.

Such guarantees issued on the backing or against the security of a foreign bank acceptable to local banks are called Counter Guarantee. A counter guarantee may either be a Bid Bond, Performance bond or an Advance Payment Guarantee.

Sometimes under an import LC, if the transport document (bills of lading) and other related documents do not arrive on the due time at the issuing bank's counter even after the goods have reached to the destined entry point, this type of guarantee is issued in favor of the shipping company/port authority to release the imported goods.

Once the original documents arrive at the LC issuing bank and are submitted to the shipping company, guarantee will be released.

• Basic Information Sheet to be filled up and submitted by the customer.
• Citizenship and/or valid permanent ID of the borrower/authorized persons and guarantors.
• Company Registration Certificate
• Copy of PAN/VAT registration with tax payment receipt.
• Copy of partnership deed in case of partnership firm.
• Copies of Articles and Memorandum of Association and certificates of incorporation of companies.
• Board minute in case of private limited company.
• Audited, Mangament prepared or provisional financial statements of last 2 years for the running company and projected financial statement for the new company for the next 5 years.
• Authenticated copy documents relating to security offered/ applies to valuation report:
• Title Deed (Lalpurja)
• Blue print of cadastral map (Napi Naksa) certified by Napi Office
• Recent land tax payment receipt from malpot office (Tiro tireko rashid)
• Wealth tax payment receipt of the borrower
• Copy of property transfer deed Certificate from municipality stating the name of land owners of four corners along with kitta no. (Char-Killa Pramanit Gareko)
• Citizenship certificate of landlord
• pproved/Certified building drawing along with the approval (Naksha & Pass Certificate)
• "No objection Letter"(NOC) in case of collateral owned by third party (Manjurinama)
• NOC from legal hires of owner of the company/Institution mortgage of the property(ies)
• Relation certificate issued by local authority
• Resume of the major promoters with highlighting of his technical qualification business experience and expertise.
• Business plan/proposal report
• Stock report, receivables report, payables report and bank outstanding report in case of existing firm.

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