BRPD Circular Letter No. 32: Encashment of Performance Security

Managing Director / Chief Executive Officer
All Scheduled Banks operating in Bangladesh.

Dear Sir,

Context of Encashment of Performance Security.

It has recently been observed that various banks are causing unjustified delays and non-cooperation in the encashment of performance securities issued by banks on behalf of contractor institutions, in the context of obtaining purchase orders/work orders from government and private institutions. It is noted that performance security is considered an important document in the context of obtaining purchase orders/work orders from government and private institutions. If the purchaser/provider of the purchase order/work order suffers loss due to the contractor institution's failure to fulfill any terms under the contract concerned, the issuing bank shall immediately encash the said security and pay the amount fixed in the contract to the purchaser/provider of the purchase order/work order, based on their written claim, given that the bank has made an irrevocable and unconditional undertaking in the security document. Consequently, failure to encash the said security in a timely manner will create obstacles for contractor institutions in obtaining purchase orders/work orders in the future.

2. In this regard, you are hereby instructed to follow the prescribed format in providing performance security and to properly follow the contractual terms and government rules/regulations in the encashment of provided performance security.

3. This instruction is issued under the powers granted under Section 45 of the Bank Companies Act, 1991.

Bangladesh Bank
(Central Bank of Bangladesh)
Head Office
Motijheel, Dhaka-1000
Bangladesh.

Ref No.: BRPD Circular Letter No.-32
Banking Regulation and Policy Department
Date: ------------------
11 July 2024
27 Asharh 1431

Yours faithfully,

(Mohammad Shahriar Siddique)
Director (BRPD)
Phone: 9530252