“Performance Bank Guarantees” are commonly used in construction projects, government contracts, and other large-scale projects where there is a risk of default or non-performance by the contractor. By providing this guarantee, the bank ensures that the project owner is financially protected against losses resulting from the contractor’s failure to perform.
Typically, the amount of the PBG is a percentage of the contract value, and it remains in force until the completion of the project or until the contractor fulfills their obligations as per the contract terms. Once the project is completed satisfactorily, the PBG is returned to the contractor or canceled by the bank.
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