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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. Ā B. Banks are required to maintain capital against non-fund-based facilities like Bank Guarantees. Ā C. Banks should comply with Ghosh Committee recommendations while issuing bank guarantees. Ā D. 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

    ā€¢ Statement A ā€“ TrueĀ  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). ā€¢ Statement B ā€“ TrueĀ  o BGs are non-fund-based facilities, but banks must maintain capital adequacy requirements against such exposures. ā€¢ Statement C ā€“ TrueĀ  o Banks must follow Ghosh Committee recommendations, such as issuing BGs in serially numbered security forms and advising beneficiaries to verify their genuineness. ā€¢ Statement D ā€“ FalseĀ  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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