Performance Bond/Guarantee

  • Issuance Procedure For BCL:

    • Client will send us the filled in BCL Application form. We will prepare and send the Final draft of BCL to the Client.
    • Client should conclude with their Beneficiary using the final draft provided by us. Once the draft is concluded, Client should send us the following:
    1. Final BCL draft with their sign and stamp;
    2. Letter of Interest confirming acceptance for the draft and advising us to proceed further;
    3. Their Bank statement evidencing the availability of funds to cover the issuing Cost.
    • Mode of delivery - Physical copy or through swift.
    • Also an eKYC declaration letter will be given to Client, which needs to signed and sealed and sent back to us.
    • Once we receive the Signed eKYC declaration letter, we will issue an invoice of 1,500 USD for eKYC which client needs to pay.
    • Upon receipt of this payment we will release a eKYC link to client
    • Client needs to submit all the signed and sealed filled up documents, on the eKYC link/portal shared by us after which our KYC and Compliance team will review the documents.
    • Upon receiving the above documents, client should send us the filled in Offshore Account opening form, as its mandatory for the client to open account with us to obtain a RWA. Also, the standard Indemnity Documents of the bank will be provided to the Client for signing. The Client has to submit the KYC documents as per the list we will provide as a part of KYC and AML compliances including Transaction documents.
    • Once Client sends the signed and stamped filled up documents, we will send the same to our Compliance team.
    • Our compliance team will confirm if the submitted documents are in order and then we will get an invoice from the Bank towards the BCL issuing cost and also another invoice towards account opening fee.
    • After Client transfers the issuance cost as well as the account opening fee, within 10 working days we will set up the account and will get the BCL issued and it will be delivered to the Beneficiary bank.
    • End of transaction.

A performance bond is a financial instrument issued by a bank or insurance company on behalf of a contractor (typically an exporter or service provider) to guarantee that they will fulfill their contractual obligations. If the contractor fails to complete the contract according to the terms, the bond allows the buyer to claim financial compensation up to the bond amount. This bond is widely used in international trade and high-value projects, especially in industries like construction, mining, and energy.


Benefits of Performance Bonds in International Trade:


1. Provides Security to Buyers

Performance bonds offer buyers financial security and reassurance that the project will be completed as per the contract. In case of non-performance, the buyer can recover losses up to the bond amount, protecting their financial investment.


2. Increases Credibility for Exporters and Contractors

For contractors, having a performance bond in place demonstrates commitment and credibility, as it signals financial stability and seriousness. This can make them more competitive, helping to secure large contracts, especially when dealing with new buyers or in high-stakes industries.


3. Facilitates International Transactions

In cross-border trade, where trust levels may be lower due to geographical and cultural differences, a performance bond reduces risk for buyers and improves confidence in contract fulfillment. It can streamline negotiations and make it easier to close deals.


4. Reduces Project and Financial Risks

Performance bonds mitigate risks for both parties by ensuring that the buyer has a safety net if the contractor defaults. This is particularly important in sectors with high financial stakes, such as construction or energy, where contract non-performance can result in significant project delays and financial losses.


5. Legal Assurance and Compliance

Performance bonds also serve as legally binding assurances, governed by international trade regulations. This adds an extra layer of compliance, particularly in regulated industries, and makes it easier to resolve disputes through established legal frameworks.


6. Encourages Project Accountability

Since performance bonds are only issued after a thorough assessment of the contractor’s financial and operational capacity, they create accountability for the contractor to fulfill their obligations. This, in turn, incentivizes contractors to meet contractual standards, reducing the likelihood of disputes.


Overall, performance bonds are an essential tool in international trade, protecting buyers, building trust, and facilitating smoother transactions across borders. They play a vital role in risk management, especially for complex or high-value projects.