Document background
A Letter of Guarantee is a widely used financial instrument in Indian business transactions, serving as a crucial tool for risk mitigation and business facilitation. This document is particularly relevant when one party requires assurance about the performance or payment obligations of another party. The Letter of Guarantee, governed by Indian law, creates a legally binding commitment from the guarantor (typically a bank) to the beneficiary, ensuring that specified obligations will be met even if the principal debtor defaults. It's commonly used in scenarios such as bid submissions, advance payments, performance securities, and financial obligations in commercial contracts. The document must comply with Indian banking regulations, including RBI guidelines, and requires proper stamping under the Indian Stamp Act to be legally enforceable.
