Circulars/Notifications - Banking Supervision Department  
 BSD Circular No.24
September 09, 2000  

All Banks,

OPEN-ENDED GUARANTEES - ISSUANCE OF

Please refer to instruction contained in BPRD Circular No.7 dated April 4, 2000, in terms of which banks were allowed to issue open-ended guarantees without clearance from the State Bank of Pakistan, provided they 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 are also permitted 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 to case basis.

2. Despite above relaxation, it has come to the notice of the State Bank of Pakistan that customers of banks face difficulty in arranging cash and liquid securities, which impedes trade and businesses. In order to facilitate the trade and industry, it has now been decided to permit banks to issue open-ended guarantees on behalf of their clients by securing their interest fully through easily realizable securities acceptable to them instead of cash and liquid securities.

Please acknowledge receipt.

Yours faithfully,
Sd/-(KAZI ABDUL MUKTADIR)
Director

       
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