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040706
STATE BANK OF PAKISTAN - BANKING POLICY DEPARTMENT
BPD Circular No. 23 of 2004
July 6, 2004
The Chief Executives,
All Banks/DFIs
Dear Sir/Madam,
RELEASE OF SECURITY/MARGIN HELD AGAINST BANK GUARANTEE
It has been brought to our notice that the banks usually retain security/margin amount, deposited by their customer against the Bank Guarantee issued on his behalf, even after the expiry of the validity period of the guarantee and where no encashment claim from beneficiary is pending. In normal practice it takes very long time to get original guarantee released from the beneficiary and deposit it back to the issuing bank. The retention of security/margin for such a long period due to above formalities creates unnecessary problems for the customers by blocking their security/margin.
In order to overcome such difficulties it is
advised that the banks, after the expiry period of the bank guarantee, should
evaluate its effectiveness keeping in view its terms and conditions, validity
period, legal position i.e whether there is any claim or litigation pending
against the said guarantee etc., as well as obtain the legal advice from their
legal advisor/counsel. In case the issuing bank is fully satisfied that the
guarantee has lost its effectiveness in all terms, it should release the
security/margin retained by it against the guarantee after obtaining an
indemnity bond from the customer and not insist upon the return of the original
guarantee from the beneficiary. However, while releasing the security/margin to
the customer they should simultaneously inform the beneficiary about the release
of their liability towards that guarantee.
Kindly acknowledge receipt.
Yours faithfully,
Sd/-
(MUHAMMAD ASHRAF KHAN)
Senior Joint Director
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