Module: | KYC, NPAs, Advances & Investment Valuations
Q166: Which statements regarding guarantor liability are correct under the Reserve Bank of India (Treatment of Wilful Defaulters and Large Defaulters) Directions?
1. Liability is co-extensive with the principal debtor under Section 128 of the Indian Contract Act.
2. The lender must exhaust all remedies against the principal debtor first.
3. The lender can proceed against the guarantor without exhausting remedies against the principal.
4. Liability is secondary and contingent upon the principal's insolvency.
2. The lender must exhaust all remedies against the principal debtor first.
3. The lender can proceed against the guarantor without exhausting remedies against the principal.
4. Liability is secondary and contingent upon the principal's insolvency.
✅ Correct Answer: B
Liability is co-extensive with the principal debtor.
The bank can proceed against the guarantor immediately.
It does not need to exhaust remedies against the principal debtor first.
The bank can proceed against the guarantor immediately.
It does not need to exhaust remedies against the principal debtor first.