What is the primary purpose of a “Deferred Payment Guarantee” (DPG) in the context of capital goods acquisition?

A DPG secures the repayment of installments. 2

Deferred Payment Guarantees (DPGs) are issued when a buyer purchases capital goods (like machinery) on long-term credit. 3. Structure: The buyer pays a small down payment (e.g., 10-15%) and agrees to pay the rest in installments over 3-5 years. The seller requires a DPG from the buyer’s bank. 4. The Bank’s Role: If the buyer fails to pay a scheduled installment, the Bank must pay it. DPGs are treated practically like Term Loans for capital adequacy purposes because the liability amortizes over time.