Standby Letter of Credit / Guarantees
Standby letters of credit/Guarantees are instruments used by the bank on behalf of its customers that they are willing to make payments on their behalf, if and when called for.
Most often, these payments are to be made when the customer has failed or refused to do so themselves. The value of the bank’s commitment lies in the fact that the bank is obligated to pay, even in the event of a dispute, as long as the documents specified in the Standby L/C are presented as required.