Which of the following statements about a Bank Guarantee is correct?​

Correct option is B

A Bank Guarantee is a financial instrument through which a bank promises to fulfill a financial or contractual obligation if its customer fails to do so. It acts as a safety net for the beneficiary, assuring that the agreed payment or performance will be completed.

Before issuing a guarantee, the bank generally seeks collateral such as property, fixed deposits, or other assets. These guarantees are commonly used in construction projects, import/export trade, service contracts, and other high-value transactions.

Types of Bank Guarantees:

• Performance Guarantee: Ensures contract fulfillment.

• Financial Guarantee: Secures repayment of debt or obligation.

• Advance Payment Guarantee: Protects advance payments if the supplier fails to perform.