Train The Trainer Training

Finacle 10.2.25
User Manual

Bank Guarantee
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All software is used for educational purposes only.

NIIT/PSB/Version 1.0

Copyright (C)NIIT. All rights reserved.

No part of this publication may be reproduced, stored in retrieval

system or transmitted in any form, or by otherwise, without the prior

written permission of the publisher

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 Contents
1. OVERVIEW ............................................................................................................................................... 4

2. BANKING INPUTS..................................................................................................................................... 5

2. GERERAL USER ACTIVITIES ...................................................................................................................... 7

8.1 - Process of Issuing Bank Guarantee........................................................................................................... 7

8.2 - Process of Verification of Bank Guarantee Issue .................................................................................... 12

8.3 - Process of Modification of Bank Guarantee ........................................................................................... 14

8.4 - Process of Marking Invoke ...................................................................................................................... 15

8.5 - Process of Verifying the Marking Invoke ................................................................................................ 16

8.6 - Process of Invoking the Guarantee ......................................................................................................... 17

8.7 - Process of Verifying the Invocation of BG ............................................................................................... 18

8.8 - Process of Closing the BG ....................................................................................................................... 20

8.9 - Process of Closure of Guarantee ............................................................................................................. 20

8.10 - Process of Verifying the Closure of BG .................................................................................................. 21

8.11 - Process of Reverse ................................................................................................................................. 23

8.12 – Verification Process of Reverse .............................................................................................................. 26

8.13 – Inquiry of a Bank Guarantee.................................................................................................................. 27

3. ADVISING A GUARANTEE ....................................................................................................................... 29

4. MENU OPTIONS USED IN THIS MODULE ................................................................................................ 30

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 1. OVERVIEW

Bank Guarantee is an instrument issued by the Banks in which the Bank agrees to stand guarantee
against the non-performance of some activity/event of a customer. The quantum of guarantee
is called the „guarantee amount‟. The guarantee is issued on receipt of a request from „applicant‟
for some purpose/transaction in favour of a „Beneficiary‟. The guarantee amount will be paid by
the „issuing bank‟ to the „beneficiary‟ of the guarantee on receipt of the „claim‟ from the
beneficiary i.e., when the guarantee is “Invoked”

In most cases, guarantees may not be invoked at all. The purchaser of computer hardware
may insist on a bank guarantee from the hardware vendor at the time of placing the order to ensure
the successful installation and maintenance of the same, failing which the beneficiary may claim the
loss incurred from the vendor.

The guarantees issued by the banks can broadly be classified into:

 Performance Guarantee
 Financial Guarantee
 Bid Bond Guarantee
 Shipping Guarantee
 Deferred Payment Guarantee
 Advance Payment Guarantee
 Retention Money Guarantee
 Acceptances & Co-acceptances

The „Deferred Payment Guarantee‟ is different from other types of guarantees. Here the Issuing
Bank stands guarantee to some transaction between two parties; but the Bank undertakes to
make regular periodic payment (say monthly/half yearly, etc) of some fixed amount to the
„beneficiary‟ on behalf of the „applicant‟. The payment of the guarantee amount is spread over a
period of time. This type of guarantee is insisted upon in transactions where the Buyer expects
the return on investment to spread over a period of time and does not have resources to make
payment for purchase, up front.

There are further classifications of guarantees, depending on the entity to which the
guarantees are issued such as:

 Guarantees favouring Government Bodies

 Guarantees favouring others (Non-Government Bodies)

Guarantees are issued for a specific period and against some „Collateral‟. However, there are
instances when the guarantees are issued without an end date (referred to open guarantees)

Commission is collected either up front for the whole period of guarantee or collected
periodically as per the bank‟s policy. Guarantees constitute „contingent liability‟ for the Issuing Bank
and as such „transactions‟ are passed at the time of issue and are reversed on cancellation of BG
(before expiry) / on closure (on expiry) / on payment of guarantee amount (on invoked).

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When the guarantee is invoked by the beneficiary, the same is paid by the bank by debiting
the operative account of the applicant party or by creating a loan account or banks internal
account.

The banks issue guarantees not only on behalf of their customers, but also on the basis of requests
received from their correspondents world over. These Guarantees will be backed by the counter
guarantees given by the correspondent bank. Banks not only „issue‟ the guarantees, they also do
simple „advising‟ service, wherein they do not take any liability, except confirming the authenticity
of the guarantee itself.

The system takes care of-

 Creation of contingent liability transactions

 Controlling the Bank’s exposure to a particular party.
 Calculation of commission and handling charges
 Calculation/maintaining margins
 History of activities on the BG
 Formation of BG in the required text format
 Transmission of the BG

2. BANKING INPUTS

Performance guarantee: The Bank, guaranteeing the performance of a task, issues these
guarantees.

Financial guarantee: Guarantees issued for meeting financial obligation.

Shipping Guarantee: Shipping guarantees are issued by the banks when the applicant (Buyer)
has not yet received the original Bill of Lading, but wants to take possession of goods from
the shipping company.

Counter Guarantee: A guarantee received by the bank from its correspondent, against which
it is expected to issue a guarantee in favour of a named beneficiary.

Open Guarantee: A guarantee which does not have an expiry date.

Beneficiary of guarantee: The person in whose favour the guarantee is issued.

Guarantor: The person who guarantees. In case of BG,, guarantor will be Bank which issues
the Guarantee.

Invoking of guarantee: The beneficiary of the guarantee will demand payment of the
guaranteed amount from the guarantor (in this case, Bank) if the guaranteed task is not
performed. This process of demanding the payment for non-compliance is known as invoking
of guarantee.

Guarantee period: The tenure of the guarantee up to which it will be in force.

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Claim period: Normally the guarantees are issued for a specific period. As a part of the guarantee,
the guarantor can allow some time to the beneficiary to make a claim over and above the guarantee
period. This period is known as claim period.

Expired guarantee: The guarantee will be treated as expired once the guarantee period and the
claim period are over. The beneficiary will have no right for any claim from the guarantor
after the guarantee is expired.

Contingent liability: A liability, which may or may not arise. A contingent liability can occur on
account of happening or non-happening of some other event.

Solvency certificate: A certificate issued indicating the worth of the person mentioned in the
certificate. This is issued without any commitment from the side of Bank. Bank does not take any
responsibility on account of issue of a solvency certificate. Hence, neither contingent
accounting entries are passed nor limits of the applicant are updated.

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 2. GERERAL USER ACTIVITIES

8.1 - Process of Issuing Bank Guarantee

Notes:
 The user to invoke menu – OGM by entering the same in Menu Shortcut field and Clicking on Go.
System displays Outward Guarantee Maintenance screen
S. No Field Action Remarks
01. Function A-Add -
02. Guarantee Type Select Search from the list
03. CCY Select the Currency Search from the list
04. CIF ID Enter/Select the CIF ID
05. Go Button Click ok General Details screen is
displayed
06. A/c ID Enter/Search the Operative --
Account
07. Guarantee Amount Enter the Guarantee Amount
08. Paysys ID Select the PAYSYS ID Click on Party Details Tab
09. Party Details Click on Party Details Party Details tab is Displayed
10. Beneficiary Details Enter the Details --
Section
11. Advising Bank Enter the Details Guarantee Details Tab is
Correspondence displayed
Details
12. Guarantee Details Click on Guarantee Details Tab
Tab
13. Purpose of Enter the Purpose of Guarantee --
Guarantee
14. Guarantee Class Select record from the list
15. Expiry Date Enter Expiry date -
16. Applicable Rules Select form the Dropdown Select applicable rules
17. Applicable sub-rules Enter the sub rule Add / prefix and type the rules
18. Next Record Arrow Click Takes to Auto renewal screen
19. Charges borne by Select appropriate record From dropdown list
20. Auto renewal Select yes/no Select the appropriate radio
applicable button
21. Limit Details Tab Click on limit details tab Limit details tab is displayed
22. Limit Information Enter relevant information Click on Document Details
23. Document Details Click Document details tab Document details Tab is
Tab displayed
24. Various Fields Enter relevant information
25. Outward Message Click on View Message Icon Message 760 will be
Details Tab generated , fill the required
fields in the screen
26. Charges Tab Click on charges Tab for
applicable charges

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 27. Submit Click on Submit Guarantee no is displayed

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 8.2 - Process of Verification of Bank Guarantee Issue
S. No Field Action Remarks
01. Menu Shortcut Enter Menu - OGM -
02. Go Click on Go Guarantee Criteria screen is
displayed
03. Function Select V-Verify -
04. Guarantee No Enter the Guarantee No Searcher can be used to select
the record
05. Go Click on Go General Detail Tab is displayed
06. General Details Tab Auto populated Authorizer to ascertain the
correctness of the details
entered.
Click on Party detail Tab
07. Party Detail Tab Click on Guarantee Detail Tab Authorizer to ascertain the
correctness of the details
entered.
08. Next Record Click on the Next Record Auto renewal details is
displayed.
Click on Limit Details Tab
09. Limit Details Tab Click on Document Tab Authorizer to ascertain the
correctness of the details
entered.
10. Document Tab Click on Submit Button Authorizer to ascertain the
correctness of the details
entered.
11. Outward Message Click on message details Tab Click on message 760 icon and
Tab see the message.
12. Charges Details Tab Click on Charges Details Authorizer to ascertain the
correctness of the details
entered.
13. System displays the result
Submit Click on Submit
screen

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 8.3 - Process of Modification of Bank Guarantee
S.
Field Action Remarks
No
1 Menu Shortcut Enter Menu – OGM -
2 Go Click on Go OGM criteria screen appears
Function M- Modify
3 Guarantee No Enter Guarantee No -
System displays the Currency,
4 - Press Tab key Sol ID, and Name on the
Account
System displays the General
5 Go Click on Go
Details screen
Any field where Data Replace the data entered
6 Scroll down the screen
entered Incorrectly incorrectly earlier
7 Submit Click on Submit Result Screen is displayed

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 8.4 - Process of Marking Invoke
Notes:
This menu is used to Mark Invocation of a Bank Guarantee

S No Field Action Remarks

01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select G-Mark Invoke -
04. Guarantee No Enter the Guarantee No
Mark Invocation Tab is
05. Go Click on Go Button
displayed
06. Invocation Amt Enter the Amount
07. Submit Click on Submit Result Screen is displayed

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 8.5 - Process of Verifying the Marking Invoke
S No Field Action Remarks
01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select V-Verify -
04. Guarantee No Enter the Guarantee No
Mark Invocation Tab is
05. Go Click on Go Button
displayed
The Authorizer has to ensure
06. View the correctness of the data
entered
07. Submit Click on Submit Result Screen is displayed

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 8.6 - Process of Invoking the Guarantee
S No Field Action Remarks
01. Menu Shortcut Enter - OGM -
02. Go Click on Go button The Criteria Screen is displayed
03. Function Select N- Invoke -
04. Guarantee No Enter the Guarantee No
05. Go Click on Go Button Invocation Tab is displayed
In case the Customer is unable
to pay the Guarantee amount,
It results in fructification. In
case of invocation the bank will
06. Invocation Tab --
have to open a Loan A/c for
invocation and the Loan A/c ID
has to be entered in the
invocation tab.
07. Submit Click on Submit Result Screen is displayed

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 8.7 - Process of Verifying the Invocation of BG
Notes:
This menu is used to Mark Invocation of a Bank Guarantee

S No Field Action Remarks

01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select V-Verify -
04. Guarantee No Enter the Guarantee No
Mark Invocation Tab is
05. Go Click on Go Button
displayed
The Authorizer has to ensure
06. View the correctness of the data
entered
07. Submit Click on Submit Result Screen is displayed

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 8.8 - Process of Closing the BG
S No Field Action Remarks
01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select Z-Close -
04. Guarantee No Enter the Guarantee No
General Details Tab is
05. Go Click on Go Button
displayed
06. Submit Click on Submit Result Screen is displayed

8.9 - Process of Closure of Guarantee

S No Field Action Remarks
01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select – Z- Close -
04. Guarantee No Enter the Guarantee No
05. Go Click on Go Button Invocation Tab is displayed
In case the Customer is unable
to pay the Guarantee amount,
It results in fructification. In
case of invocation the bank
06. Invocation Tab --
will have to open a Loan A/c
for invocation and the Loan
A/c ID has to be entered in the
invocation tab.
07. Submit Click on Submit Result Screen is displayed

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 8.10 - Process of Verifying the Closure of BG
S No Field Action Remarks
01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select V-Verify -
04. Guarantee No Enter the Guarantee No
General Details Tab is
05. Go Click on Go Button
displayed
06. Submit Click on Submit Result Screen is displayed

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 8.11 - Process of Reverse
Notes: Flow- Issue Guarantee Reverse the Guarantee Close the Guarantee.
We have already discussed the activity of issuance and closure of a Bank Guarantee.
Given below the process of Reversal of a Bank Guarantee.
This menu is used to Reverse of a Bank Guarantee- OGM

S No Field Action Remarks

01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select R-Reverse -
Visit 2nd page of Guarantee
04. Guarantee No Enter the Guarantee No detail and mark Original
Guarantee as Received.
05. Go Click on Go Button General Tab is displayed
System will release the
06. Margin Tab
attached margin by default.
07. Click on Charges Detail Tab
System will calculate
Pick the appropriate Charge
08. Charges Detail Tab applicable charges
table code
automatically.
09. Submit Click on Submit Result Screen is displayed

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 8.12 – Verification Process of Reverse

This menu is used to verify -Reverse of a Bank Guarantee- OGM

S No Field Action Remarks

01. Menu Shortcut Enter - OGM -
The Criteria Screen is
02. Go Click on Go button
displayed
03. Function Select V-Verify -
04. Guarantee No Enter the Guarantee No
05. Go Click on Go Button General Tab is displayed
System will release the
06. Margin Tab Visit margin details
attached margin by default.
07. Click on Charges Detail Tab
08. Charges Detail Tab Visit Charges details
09. Submit Click on Submit Result Screen is displayed

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 8.13 – Inquiry of a Bank Guarantee

This menu is used to Inquire a Bank Guarantee- HGI

S No Field Action Remarks

01. Menu Shortcut Enter - HBNKGI -
The Criteria Screen is
02. Go Click on Go button
displayed
03. CIF ID Enter CIF Id of a Customer
04. Various Fields Select appropriate criteria -
05. Submit Click on Submit Result Screen is displayed

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 3. ADVISING A GUARANTEE

Guarantees received from their correspondents can be advised using menu IGM. Through this
menu, users will be capturing the details of the guarantee being advised. Users have to select a
INWARD register defined through GTPM menu, for capturing the details.

In order to issue an Inward Guarantee in IGM following tabs need to be visited mandatorily –

General Details

Party Details

Guarantee Details

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 4. MENU OPTIONS USED IN THIS MODULE

Sl No Activity Menu Shortcut

1 Issue of Bank Guarantee OGM
2 Verification of BG OGM
3 Amendment of BG OGM
4 Guarantee Inquiry HBNKGI
5 Mark Invoke OGM
6 Reverse Mark Invoke OGM
7 Invoke BG OGM
8 Reverse BG OGM
9 Close BG OGM
10 Advising of a Guarantee IGM

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