Case Studies

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Interlinkages Online provides a cost effective foreign performance Guarantee solution to an Indian Project engineering company for a large Oil Refinery project in Bangladesh

Problem statement

Infrastructure service providers/ vendors for any large project in a country are usually required to provide a performance guarantee from a scheduled bank in that country. This becomes a problem for any foreign service provider which does not have a bank relationship in that country.

Normally in such cases, MNC banks with presence in both countries are the last resort for most of the companies. However such Bank guarantees come at a premium with very high fee and the pricing is not risk-based.

A Project engineering company based in Mumbai, India had secured a consultancy assignment for a large Oil refinery project in Bangladesh. As this was the first business engagement between the Indian company and its Bangladeshi customer, the customer requested for a 360 days Performance Guarantee from a Bangladeshi Bank. The Indian company banked with a public sector bank in India and did not have any knowledge or connection with a Bangladeshi Bank who could issue a Performance guarantee on behalf of the customer. The company approached its PSU bank branch for help with a counter-guarantee issuance in Bangladesh but was not able to make any headway.

The Company approached a few MNC banks in India who had branches in Bangladesh to issue a Performance guarantee from their Bangladesh branch backed by a bank guarantee from company’s PSU bank in India but the fee quotes received were very high and the project bottom line would have been impacted at such a high guarantee issuance fee. The company was looking for a cost-effective solution to issue a performance guarantee from a Bangladeshi Bank backed by a guarantee from the company’s PSU bank in India.

Company got access to a local bank in Bangadesh which was also a house bank of its customer and obtained the performance guarantee at a small fraction of the fee quoted by MNC banks

The company was able connect to a local bank in Bangladesh which had credit appetite on company’s PSU bank. The company was able to provide the guarantee without impacting its project profitability.

The company registered with ‘Interlinkages Online’ to arrange a bank in Bangladesh which could provide a performance guarantee to its customer backed by a counter-guarantee from its PSU bank in India.  The company listed its requirements on Interlinkages Online and within 2-3 days received a quote from a bank in Bangladesh

Our customer was able to get an online fee quote which was over 60% better than the alternative quote it had.

Through the discussion box feature in ‘Interlinkages Online’, the company was able to discuss and negotiate the guarantee draft with the Bangladeshi bank.

The Bangladeshi customer of the India company was happy with the choice of the bank as it was one of its house banks.

The Interlinkages Online team was able to guide the client on clauses to be added in the Guarantee and Interlinkages service team worked closely with the issuing bank in India to handhold the transaction.

Interlinkages enabled the customer to get a bank in another country through its online platform at a fraction of the cost. This ensured that the customer was not required to compromise with the project profitability.

The Bangladeshi bank also benefited through Interlinkages membership as they were able to finance a deal which otherwise they would have never found.

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