“BG” commonly stands for “Payment Bank Guarantee”. The Bank Guarantee is a commitment made by a bank or financial institution on behalf of a customer to fulfill payment obligations to a third party in case the customer fails to do so. It is essentially a written promise from the bank to cover a specified amount of money if the customer defaults on its obligations.
There are several types of Payment Bank Guarantees tailored to different aspects of trade transactions. These may include Advance Payment Guarantees, where the bank guarantees repayment of an advance payment made by the buyer to the seller before the goods are delivered or services rendered. There are also Import Payment Guarantees, which assure the seller that they will receive payment upon presenting compliant documents under a letter of credit or other payment mechanism.
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