During execution of projects exporters are required to furnish bonds duly supported by bank guarantees at various stages starting from bidding, Advance Payment, Due Performance to releasing retention money which is furnished for completion of defects/warranty period. The exporter furnishes Advance payment bond for receiving advance payment and due performance bond for assuring due performance of the contract. The exporter may also have to furnish bank guarantee to foreign bank for overseas borrowings in foreign currency abroad. The cover provides protection to the banks against losses that it may suffer due to insolvency and/ or protracted default of the borrower. Covers can be obtained for each Bank Guarantees issued by the Bank at various stages of the contract.

Risks Covere:

  1. Insolvency of Borrower
  2. Protracted Default of Borrower

Loss Coverage:

75% or 90%

Period of Cover:

As per period of Bank Guarantee

Premium rate:

0.70% p.a. for 75% covers
0.84% p.a. for 90% covers


  1. Obtain cover prior to issuance of Bank Guarantee
  2. Seek extension in period of cover prior to its expiry
  3. Advise when beneficiary invokes the guarantee
  4. Recall advances from exporter
  5. Filing of claim within 6 months from the date for reporting Default.
  6. Recovery action after payment of claim and sharing of recovery.

Important Obligation Of The Bank:

Obtain cover for each project separately. Maintain advance deposit equivalent to one month’s premium. Submission of monthly declaration of advances granted and repayments made in the account and payment of due premium on or before 10th of the succeeding month. Approval of the Corporation for extension of due date. Default to be reported within 4 months from due date or extended due date of advances. If not recovered, filing of claim within 6 months of the Report of Default. Recovery action after payment of claim and sharing of recovery.