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    Question

    Which of the following statements are not true regarding

    the issuance of a Bank Guarantee (BG)? A. All bank guarantees have an expiry period and expiry date. ┬аB. Banks are required to maintain capital against non-fund-based facilities like Bank Guarantees. ┬аC. Banks should comply with Ghosh Committee recommendations while issuing bank guarantees. ┬аD. Banks are not allowed to issue bank guarantees in favor of other banks and financial institutions.
    A Both A and B Correct Answer Incorrect Answer
    B Only C and D Correct Answer Incorrect Answer
    C Only D is incorrect Correct Answer Incorrect Answer
    D All are correct Correct Answer Incorrect Answer
    E All are incorrect Correct Answer Incorrect Answer

    Solution

    тАв Statement A тАУ True┬а o All BGs must have an expiry period and expiry date. RBI guidelines state they generally should not exceed 10 years (though banks may allow longer after assessing ALM impact). тАв Statement B тАУ True┬а o BGs are non-fund-based facilities, but banks must maintain capital adequacy requirements against such exposures. тАв Statement C тАУ True┬а o Banks must follow Ghosh Committee recommendations, such as issuing BGs in serially numbered security forms and advising beneficiaries to verify their genuineness. тАв Statement D тАУ False┬а o Banks can issue BGs in favor of other banks/financial institutions, subject to prudential norms. They are not outright prohibited.

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