BANKING AFFAIRS

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

What do we call the guarantee given by the bank for a payment when the buyer is not able to pay the required amount of money to the seller?

A	Letter of Credit
B	Bank Guarantee
C	Bill of Lading
D	None of the above

Explanation:

Detailed explanation-1: -An SBLC is a type of LC where the buyer’s bank will pay the seller in case the buyer is unable to pay. A bank guarantee covers only financial risks like the failure to deliver goods on time, etc.

Detailed explanation-2: -Retrospective guarantee – It is a guarantee issued when the debt is already outstanding. Prospective guarantee – Given in regard to a future debt. Specific guarantee – Also known as a simple guarantee, it’s a type that is used when dealing with a single transaction, and therefore a single debt.

Detailed explanation-3: -A bank guarantee is a type of financial backstop offered by a lending institution. The bank guarantee means that the lender will ensure that the liabilities of a debtor will be met. In other words, if the debtor fails to settle a debt, the bank will cover it.

Detailed explanation-4: -(iv) The bank guarantee is a commitment made by the issuing bank to make payment to the beneficiary (albeit at the behest of the bank’s constituent).

There is 1 question to complete.