Dishonouring surety will make guarantor wilful defaulter

Companies in a group will be reckoned as wilful defaulters if guarantees furnished by them on behalf of the wilfully defaulting units are not honoured when invoked by the banks/ financial institutions.

The RBI clarified that this would apply only prospectively and not to cases where guarantees were taken prior to the current circular.

The RBI said, “Banks/ financial institutions may ensure that this position is made known to all prospective guarantors at the time of accepting guarantees.”

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