Article -21 URDG-758

A guarantor must pay in the currency specified in the guarantee, and whatever that currency may be. Since it would be unusual for a guarantee to fix a monetary sum without identifying the currency, this provision should not cause too much problems.

Article -21 URDG-758 Currency of Payment 

A. The guarantor shall pay a complying demand in the currency specified in the guarantee, except exceptions given in below sub article. 

B. If the guarantor is not able to make payment on any date on which a payment is to be made under the guarantee due to:

  • The guarantor is unable to make payment in the currency specified in the guarantee due to an impediment beyond its control.
  • It is illegal under the law of the place for payment to make payment in the specified currency in the guarantee.

In these cases, a guarantor shall make payment in the currency of the place for payment even if the guarantee indicates that payment can only be made in the currency specified in the guarantee. The instructing party or, in the case of a counter-guarantee, the counter guarantor, shall be bound by a payment made in such currency.

The guarantor or counter-guarantor may elect to be reimbursed either in the currency in which payment was made or in the currency specified in the guarantee or, as the case may be, the counter-guarantee.

For an example if applicant from USA given the request to issue counter guarantee in a favor guarantor (local guarantor) who issues the local guarantee in the favor of beneficiary located in India in USD.

In case if the guarantor is not able to make the payment to the beneficiary upon complying demand in USD due to any reason beyond its control then in that case a local guarantor can make the payment to the beneficiary in local currency which is INR and claim back to the counter guarantor either either in INR or USD.

C. Payment or reimbursement in the currency of the place for payment under above sub article (b) is to be made according to the applicable rate of exchange prevailing there when payment or reimbursement is due. However, if the guarantor has not paid at the time when payment is due, the beneficiary may require payment according to the applicable rate of exchange prevailing either when payment was due or at the time of actual payment.

A guarantor need to make the payment maximum within 3 business days following the day of determination of a complying demand. In case a demand is non-complying it must be rejected within 5 business days following the day of the receipt of the demand.

For an example if the demand was examined on the very first day and found to be complied, in that case a guarantor can use the lowest currency conversion rate to make the payment to beneficiary within allowed period of 5 business days.

However, in case if guarantor fails to pay complied demand within allowed time period, then a beneficiary may choose any past day’s highest rate as per their benefit and ask guarantor to make the payment.

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Chandan Kumar Yadav
My name is Chandan Kumar Yadav CDCS, CSDG, CITF, PGDIBO,AML-KYC, CCFE, MLIBF, CSF, 6SIGMA a trade finance professional with an experience of 11 years whereas worked with several stages of letter of credit, bank guarantee and on other payments methods of trade transactions such as documentary collection, open accounts, SBLC etc., I have a fair understanding of Trade Based Money Laundering as well, Blogging related to Trade Finance is my passion and I want to share which I know and learn from others, I have worked with Wells Fargo, Yes Bank Limited and Bank of America, India which helped me to gain knowledge, view of Trade Finance and importance of International Trade in world's economy. Trade Finance is thumping product, everyday we are learning something new so in order to keep learning I started this as one of the platform. . Let's Learn Together

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