Who can issue Bank Guarantee?

A bank guarantee can only be issued by a scheduled commercial bank or a financial institution authorized by the Reserve Bank of India (RBI). These institutions have the legal standing and financial credibility to provide a guarantee to customs authorities, ensuring that the importer or exporter will meet their obligations.

Entities Authorized to Issue Bank Guarantees for Customs:

1. Scheduled Commercial Banks:
   
   • These are the banks that are part of the RBI’s list of scheduled banks and are recognized for their financial stability and regulatory adherence. These banks can issue customs bank guarantees for businesses seeking to import or export goods.
   • Examples include major national and international banks such as State Bank of India (SBI), HDFC Bank, ICICI Bank, Axis Bank, etc.
2. Financial Institutions:
   
   • In some cases, other financial institutions like development banks and non-banking financial companies (NBFCs) that have been authorized by the RBI may also issue a bank guarantee. However, the majority of customs guarantees are issued by scheduled commercial banks.

Process for Issuance:

To issue a bank guarantee, the importer or exporter must approach the bank with a request, providing the necessary documentation such as:

• Customs documentation (e.g., details of the import/export transaction)
• Legal and financial documents (e.g., business registration, tax identification)
• Security or collateral (if required, depending on the amount of the guarantee)

Once the bank assesses the applicant’s creditworthiness and the nature of the transaction, it will issue the guarantee on behalf of the importer/exporter to the customs authorities.

The bank guarantee serves as a guarantee to the customs authorities that the obligations (such as payment of duties or taxes) will be fulfilled by the importer/exporter. If the obligations are not met, the customs authorities have the right to encash the guarantee.