JAIIB PPB Paper-2 Module-B Unit 12: Deferred Payment Guarantee

20/03/2023

JAIIB Paper 2 (PPB) Module B Unit 12: Deferred Payment Guarantee (New Syllabus)

The Institute of Indian Banking and Finance (IIBF) has recently announced the revised syllabus and exam format for the JAIIB Exam 2023. The upcoming exam will comprise of four papers, with Paper 2 (Principles & Practices of Banking) covering Unit 12: Deferred Payment Guarantee. This particular unit holds significant importance for candidates, as it will greatly impact their performance in the exam.

To assist candidates in comprehending the topic, we will provide all the necessary details related to Unit 12: Deferred Payment Guarantee of JAIIB Paper 2 (PPB) Module B: Functions of Banks. We strongly recommend candidates to refer to this article and also utilize our Online Mock Test Series to enhance their understanding of Foreign Currency Accounts for Residents and other related aspects.

For candidates appearing for the JAIIB Certification Examination 2023, it is essential to comprehend each unit in the syllabus, including the Marketing unit. This unit holds great importance in the banking industry, and candidates must prepare thoroughly to excel in the exam and establish a successful career in the banking sector.

Deferred Payment Guarantee

In a deferred payment guarantee, a third party, mostly banks and financial institutions, guarantee the payment of the instalments.
This guarantee ensures timely payment of the instalments to the seller/ exporter, failing which, the guarantee can be invoked and payment received.

Method of Payment

In a contract for import of goods on deferred payment terms, the importer is required to make payments in instalments over a period of time which may range from 1 to 7 years, in a normal deferred payment contract. The payment is usually done on the following terms:

Advance payment of 10% to 15% of the price of the goods is made by the buyer.
Another 10% to 15% on receipt of document under letter of credit.
The balance amount is paid in instalments spread over a period of 1 to 7 years, which is secured by a ‘Deferred Payment Guarantee’.

In a deferred payment guarantee, which as stated earlier, issued by banks and financial institutions , what is guaranteed, is the timely payment of instalments and interest if provided. This is done by issuing a deferred payment guarantee in which the following terms are mandatory:

The supply of goods by the seller to the buyer and the seller agreeing to postpone the payment of the price, this being the consideration of the guarantee;
The Payment schedule of both the instalment and the interest;
The unconditional and irrevocable assurance of the bank that it would make payments on the invocation of the guarantee.

JAIIB PPB Module B Unit 12 Deferred Payment Guarantee PDF