RBI GUIDELINES IN

DPGS

VARNA S S
MBA ,S3
DEFFERED PAYMENT GUARANTEE SYSTEM
(DPGS)
• Deferred Payment Guarantee is a guarantee for a payment usually on installments which
has been deferred or postponed. Banks issue DPG in the cases of purchase of capital
goods/machinery where the seller offers credit to the buyer and buyer’s bank guarantees
the due payments to the seller.
• The seller draws drafts of different maturities on the buyer which are accepted by the
buyer and co-accepted by the Buyer’s bank
 FEATURES

• Under this type of guarantee, the banker guarantees the Payment of installment Over a
period of time
• This type of guarantee required When the customer on credit purchases goods or
machinery and payment is to be made In installment on specified dates

• A deferred Payment Guarantee constitutes an undertaking on the part of the bank to make
payment of deferred installments to the seller ( beneficiary) on due dates In the event of
default by the customer ( buyer)
RBI GUIDELINES IN DPGS

• Banks should generally provide deferred payment guarantees backed by adequate

tangible securities or by counter guarantees of the Central or the State Government or
public sector financial institutions or of insurance companies and other banks.
• Banks, which intend to issue deferred payment guarantees on behalf of their borrowers
for acquisition of capital assets should ensure that the total credit facilities including the
proposed deferred payment guarantees do not exceed the prescribed exposure ceilings
• The proposals for deferred payment guarantees should be examined having regard to the
profitability / cash flows of the project to ensure that sufficient surpluses are generated by
the borrowing unit to meet the commitments as a bank has to meet the liability at regular
intervals in respect of the instalments due.
• The criteria generally followed for appraising a term loan proposal for acquisition of
capital assets should also be applied while issuing deferred payment guarantees.