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The Deferred Payment Guarantee is a crucial financial instrument in Indian commercial transactions, particularly utilized when buyers require extended payment terms for significant purchases or project financing. This document, governed by Indian law and RBI regulations, enables banks to guarantee future payments to sellers/beneficiaries according to predetermined schedules, typically spanning several months or years. It's commonly used in international trade, infrastructure projects, and large equipment purchases, providing security to sellers while offering payment flexibility to buyers. The guarantee's structure must comply with Indian Contract Act provisions and RBI guidelines on bank guarantees, including specific requirements for invocation, validity periods, and documentation. This instrument helps facilitate large commercial transactions by mitigating payment risks and providing financial security to all parties involved.
