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    Deferred Payment Guarantee: Melbin Maria Noble S3, Mba

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    melbinmarianoble
    The document discusses deferred payment guarantees (DPG). A DPG is a guarantee that protects a business seller who allows the buyer to defer paying part of the sale price over an agreed period of time. It guarantees the seller will receive the full deferred payment amount regardless of whether the business succeeds under the new owner. DPGs are arranged through the surety market rather than as insurance and provide contractual security between commercial parties. The Reserve Bank of India provides guidelines for banks issuing guarantees, including limits on amounts, maturities, collateral requirements, and safeguards to prevent fraud.

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    Deferred Payment Guarantee: Melbin Maria Noble S3, Mba

    Uploaded by

    melbinmarianoble
    193 views10 pages
    The document discusses deferred payment guarantees (DPG). A DPG is a guarantee that protects a business seller who allows the buyer to defer paying part of the sale price over an agreed period of time. It guarantees the seller will receive the full deferred payment amount regardless of whether the business succeeds under the new owner. DPGs are arranged through the surety market rather than as insurance and provide contractual security between commercial parties. The Reserve Bank of India provides guidelines for banks issuing guarantees, including limits on amounts, maturities, collateral requirements, and safeguards to prevent fraud.

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    The document discusses deferred payment guarantees (DPG). A DPG is a guarantee that protects a business seller who allows the buyer to defer paying part of the sale price over an agreed period of time. It guarantees the seller will receive the full deferred payment amount regardless of whether the business succeeds under the new owner. DPGs are arranged through the surety market rather than as insurance and provide contractual security between commercial parties. The Reserve Bank of India provides guidelines for banks issuing guarantees, including limits on amounts, maturities, collateral requirements, and safeguards to prevent fraud.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    193 views10 pages

    Deferred Payment Guarantee: Melbin Maria Noble S3, Mba

    Uploaded by

    melbinmarianoble
    The document discusses deferred payment guarantees (DPG). A DPG is a guarantee that protects a business seller who allows the buyer to defer paying part of the sale price over an agreed period of time. It guarantees the seller will receive the full deferred payment amount regardless of whether the business succeeds under the new owner. DPGs are arranged through the surety market rather than as insurance and provide contractual security between commercial parties. The Reserve Bank of India provides guidelines for banks issuing guarantees, including limits on amounts, maturities, collateral requirements, and safeguards to prevent fraud.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 10

    Deferred Payment

    Guarantee

    Submitted by,
    Melbin Maria Noble
    S3, MBA
    Definition

    The DPG is set up primarily to protect the


    Seller of a business who has been
    required by the Buyer to agree a deferred
    consideration on completion, whereby
    the Buyer defers paying some of the sale
    price over an agreed period of time.
    Payment Guarantee
     A payment guarantee is a type of financial
    commitment that requires the debtor to repay the debt
    in accordance with the terms and conditions that apply
    to the original debt agreement.

     Payment guarantees mitigate credit or country risk


    when selling on an open account basis.

     They are often used to cover the non-payment of debts


    arising under a transaction or over a period of time.
    What is DPG
     It is arranged in the surety market and so is not subject to
    the restrictive exclusions and conditions associated with
    Deferred Consideration Insurance.

     The DPG acts as a guarantee, not an insurance policy,


    which provides contract comfort between two commercial
    parties.

     The DPG provides a guarantee to the Seller that he will


    receive the full deferred amount, whether the new owner of
    the business succeeds or not, providing financial security
    for the seller.
    RBI Guidelines
     As a general rule, banks may provide only financial
    guarantees and not performance guarantees.

     It would be desirable for PCBs to confine their


    guarantees to relatively short-term maturities.
    Guarantees should not be issued for periods exceeding
    ten years in any case.

     The total volume of guarantee obligations outstanding


    at any time may not exceed 10 per cent of the total
    owned resources of the bank comprising paid up
    capital, reserves and deposits.
    RBI Guidelines
     Banks should preferably issue secured guarantees. A secured
    guarantee means a guarantee made on the security of assets
    (including cash margin), the market value of which will not at
    any time be less than the amount of the contingent liability on the
    guarantee.

     Banks should avoid undue concentration of unsecured guarantee


    commitments to particular groups of customers and/or trades.

     Banks, which intend issuing deferred payment guarantees in


    respect of their borrowers for acquisition of capital assets should
    ensure that the total credit facilities including the proposed
    deferred payment guarantees do not exceed the prescribed
    exposure ceilings
    Safeguards in Issuance of Guarantees

     The bank guarantees should be issued in security forms


    serially numbered to prevent issuance of fake
    guarantees.

     Guarantees above a particular cut off point, as may be


    decided by each bank, should be issued under two
    signatures in triplicate, one copy each for the branch,
    beneficiary and Controlling Office/Head Office.

     The guarantees should not normally be allowed to the


    customers who do not enjoy credit facilities with the
    banks but only maintain current accounts.
    Safeguards in Issuance of Guarantees

     Where the customers enjoy credit facilities with other


    banks, the reasons for their approaching the bank for
    extending the guarantees should be ascertained and
    invariably, a reference should be made to their existing
    bankers with whom they are enjoying credit facilities.

     Banks, when approached to issue guarantees in favour


    of other banks for grant of credit facilities by another
    bank, should examine thoroughly the reasons for
    approaching another bank for grant of credit facilities
    and satisfy themselves of the need for doing so.
    References
     www.rbi.org.in
     www.smbcgroup.com
     www.projectexports.com
     www.wisegeek.com
     www.wikipedia.com
    Thank You

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