Banks 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 Guarantees, Supplier Credit Guarantees etc.

Features and Benefits:

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

Transaction Mechanism

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

We issue every type of guarantees as per your requirements. The most commonly used guarantees are as under:

1. Bid Bond (tender bond)

Its purpose is to secure any claims by the party inviting the tender on the tenderer in the event of withdrawal of the bid before its expiry date or if the bid is modified unilaterally. It is also used if the tender, upon being awarded the contract, refuses to sign the contract or provide further guarantees on request.

For issuance of bid bonds, customers need credit line from the bank.

2. Performance Bond Guarantee

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.

3. Advance Payment Guarantees

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.

4. Counter Guarantee

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.

5. Deferred Payment /Supplier Credit Guarantee

Generally this type of guarantee is used in import of merchandise or purchases on credit. By issuing the guarantee, MBNL agrees to pay the beneficiary up to the amount of the guarantee, in full or installment due, which otherwise was not paid by the buyer under the purchase agreement guaranteed by the bank.

6. Shipping Indemnity

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.

Documents Required:

  • The list below is a very comprehensive list of paper; however some of the documents listed below may not be relevant in some cases.
  • 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
  • proved/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.

For further information, please contact:


Mega Bank Nepal Limited

New Baneshwor Chowk, Kathmandu

Phone: 977-1-4485480, 977-1-4487071/72