The
Chief Executives,
All Banks/DFIs
Dear
Sir/Madam,
RELEASE
OF SECURITY/MARGIN HELD AGAINST BANK GUARANTEE
It
has been brought to our notice that the banks usually retain
security/margin amount, deposited by their customer against
the Bank Guarantee issued on his behalf, even after the
expiry of the validity period of the guarantee and where
no encashment claim from beneficiary is pending. In normal
practice it takes very long time to get original guarantee
released from the beneficiary and deposit it back to the
issuing bank. The retention of security/margin for such
a long period due to above formalities creates unnecessary
problems for the customers by blocking their security/margin.
In
order to overcome such difficulties it is advised that the
banks, after the expiry period of the bank guarantee, should
evaluate its effectiveness keeping in view its terms and
conditions, validity period, legal position i.e whether
there is any claim or litigation pending against the said
guarantee etc., as well as obtain the legal advice from
their legal advisor/counsel. In case the issuing bank is
fully satisfied that the guarantee has lost its effectiveness
in all terms, it should release the security/margin retained
by it against the guarantee after obtaining an indemnity
bond from the customer and not insist upon the return of
the original guarantee from the beneficiary. However, while
releasing the security/margin to the customer they should
simultaneously inform the beneficiary about the release
of their liability towards that guarantee.
Kindly
acknowledge receipt.