Circulars/Notifications - Banking Supervision Department  
 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.

Please acknowledge receipt.


       
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