Q: What is the requirement of bank guarantee ?

Ans: Let us suppose that the buyer would like to buy the computer equipments of Rs 1 crore and seller would like to sell the computer equipments of Rs 1 crore but the buyer has not the amount of Rs one crore to pay immediately and will get his payment after one month. Sellers tells buyer to give bank guarantee to get the computer equipments on credit. Bank will pay to the seller in a particular period of time if buyer does not pay. So bank guarantee is a type of promissory note given by bank to seller.

When buyer completes his payment of Rs 1 crore, the the bank guarantee will automatically become null and void. 
In banking terminology, the buyer will be the borrower or applicant whereas the seller would be the beneficiary or creditor.
So, to resolve the problem of trust and credit, the bank guarantee will be required.
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