What is Bank Guarantee (BG)?
A bank guarantee, or BG, is an undertaking by a bank to pay a beneficiary up to a fixed amount if the bank's customer does not perform as promised. Unlike a letter of credit, which is meant to be used in the normal course of payment, a guarantee is a backstop. It is called on only if something goes wrong, such as a buyer failing to pay or a contractor failing to deliver. Common types include payment guarantees, performance guarantees and advance-payment guarantees.
Why it matters for exporters
Field 1.12 of the EDF, mode of realisation, has three options: L/C, BG and Others. If your export payment is secured by a guarantee issued in your favour, the BG option may apply, and field 1.19 asks for the AD bank handling the L/C or BG. Most service exporters, paid by plain bank transfer, will tick "Others". If you are unsure whether a guarantee counts as the mode of realisation for your contract, ask your AD bank before filing.
Guarantees can also flow the other way. A foreign client might ask you to furnish a performance guarantee, issued by your Indian bank, before paying an advance. That is a separate banking arrangement and does not by itself change how you fill the EDF. See mode of realisation in the EDF.
Example
Beacon Infra Consultants signs a ₹60,00,000 engineering services contract with a client in Saudi Arabia. The client's bank issues a payment guarantee in Beacon's favour covering the invoices. Beacon's AD bank advises that BG is the right mode of realisation, so Beacon ticks BG in field 1.12 and names the bank in field 1.19.
Common confusion
A BG is not a payment in itself. You still need the client to pay, or you need to call the guarantee, for the export to be realised. Compare with a letter of credit.