Bank Guarantee is a Non Fund based limit which minimizes the risk involved in commercial contracts. Here the Bank agrees to become a guarantor and commits itself to pay the agreed amount in case of non-performance of some action/performance of the customer. A bank guarantee enables the customer to expand its activity by providing aid in purchase of goods, equipment and so on.The guarantee is based on the application made by 'applicant' in favour of a 'Beneficiary' for a stipulated amount. The 'issuing bank' will pay the guarantee amount to the 'beneficiary' upon receipt of the 'claim' from the applicant. In case of default made by the Seller in delivery of the goods or in completion of the terms of agreement, the bank guarantee may be cancelled by the applicant. Thus a bank guarantee discharges the liability of a third person in case of default made by its applicant. Track record of customers and their financial position are the guiding factors in deciding the Guarantee limit, security and margin.