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The Bank Credit Guarantee agreement is a fundamental document in Indian banking transactions, used when a third party (guarantor) agrees to secure a borrower's obligations under a credit facility. This document is essential when banks require additional security beyond the primary borrower's assets or creditworthiness. The agreement must comply with Indian banking regulations, particularly the Banking Regulation Act 1949 and RBI guidelines, while also adhering to the Indian Contract Act 1872's provisions on guarantees. It typically includes detailed terms about the guarantee's scope, enforcement mechanisms, representations and warranties, and the specific circumstances under which the guarantee can be invoked. This document is particularly crucial in corporate lending, project finance, and SME financing where credit enhancement is required.

1. Parties: Identification of all parties: the Bank (creditor), the Borrower (principal debtor), and the Guarantor

2. Background: Context of the guarantee, reference to the underlying credit facility, and purpose of the guarantee

3. Definitions: Definitions of key terms used throughout the agreement

4. Guarantee and Indemnity: Core section detailing the guarantee obligations, extent of liability, and indemnification provisions

5. Scope of Guarantee: Specific details of what is being guaranteed, including maximum liability amount and duration

6. Nature of Guarantee: Specification that it is a continuing guarantee and details of its unconditional and irrevocable nature

7. Guarantor's Representations and Warranties: Guarantor's confirmations regarding their capacity, authority, and financial condition

8. Payment Terms: Terms and conditions for payment upon demand, including timing and method

9. Bank's Rights and Remedies: Powers and rights of the bank in enforcing the guarantee

10. Preservation of Rights: Provisions ensuring bank's rights are preserved despite variations in the underlying facility

11. Notices: Communication procedures and contact details for formal notices

12. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction details