Q: What is invocation of bank guarantee?

Ans: The beneficiary requires to invoke the bank guarantee on or before the expiry date of the guarantee . If bank does  not receive any claim on or before the validity period mentioned,  the bank is discharged from its liability. 

A bank is obliged to honour any legitimate claim within the validity period of the guarantee. If the invocation is in the order and there is no court prohibiting the payment, the bank is required to honour payment to the beneficiary. 

Before making the payment to beneficiary, bank informs the  applicant about the invocation of the bank guarantee and asks him to arrange funds for payment of claim amount. If applicant does not arrange the funds for payment of claim amount, the bank will honour the bank guarantee and transfer the fund to beneficiary. 

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