Guarantor for a loan, and the bank is asking you to pay?

1Your rights

• Know what you signed. Ask for copies of your guarantee, the sanction letter, the loan account statement and every notice. Your guarantee may be limited to an amount, or cover only certain loans: the deed decides.
• Changes without your consent can release you. Under the Indian Contract Act, 1872, a guarantor is discharged if the lender, without the guarantor's consent, varies the loan terms (section 133), releases the borrower (section 134), or makes a settlement with, gives extra time to, or promises not to sue the borrower (section 135).
• The security protects you too. You're entitled to the benefit of every security the lender holds for the loan. If the lender loses or gives up a security without your consent, you're discharged to the extent of its value (section 141).
• If you pay, you step into the lender's shoes. You can recover what you paid from the borrower, with the lender's rights against the borrower and the securities (sections 140, 141 and 145). Get a written receipt for every payment.
• For future loans only, a continuing guarantee can be revoked by written notice to the lender (section 130). This doesn't cancel your liability for amounts already lent.
• Fair treatment in recovery. RBI's rules apply to recovery agents dealing with guarantors as with borrowers: no intimidation or harassment, no threatening or anonymous calls, and no calls before 8 am or after 7 pm.
• SARFAESI notices: the SARFAESI Act treats a guarantor, and anyone who mortgaged property for the loan, as a "borrower", with the same notices and rights. See SARFAESI notice: your deadlines.

2What the lender can lawfully do

• Ask you to pay the full amount due. A guarantor's liability is the same as the borrower's (section 128), unless the guarantee limits it. Courts have held that the lender can proceed against the guarantor without first suing the borrower or selling the security.
• Report the default on your credit report. Guaranteed loans appear on the guarantor's credit report, so an unpaid loan can lower your score.
• Take legal action: a recovery case in a civil court or the Debts Recovery Tribunal (DRT), and SARFAESI action against any property you mortgaged. If the borrower is a company, lenders can also start insolvency proceedings against its personal guarantors under the Insolvency and Bankruptcy Code.
• Large defaults: where ₹25 lakh or more is outstanding, RBI's rules on wilful defaulters can extend to guarantors in some cases, but only after a show-cause notice and a chance to reply in writing.

3What to do now

1. Don't ignore any notice. Note the date you received it, keep the envelope, and reply in writing.
2. Don't sign anything new without a lawyer seeing it: an "acknowledgement of debt", a balance confirmation, a revival letter or a fresh guarantee. A written acknowledgement can extend the time the lender has to sue you (Limitation Act, section 18).
3. Get your documents using the letter below, and read the guarantee deed: amount, which loans it covers, and whether it's a continuing guarantee.
4. Check your credit report. Each credit bureau must give you one free full report a year.
5. Bring in the borrower and anyone who mortgaged property. They're liable for the same loan. A one-time settlement, often funded by selling the mortgaged property, is how many of these cases end. RBI's 2023 framework lets banks agree settlements under their own policy, but a settlement is the bank's decision, not a right.
6. Get legal advice early. If you can't afford a lawyer, your District Legal Services Authority gives free legal aid to people who are eligible (see nalsa.gov.in).
7. Beware of "settlement agents" who promise to close your loan for a small fraction if you pay them a fee first. Only the bank can agree a settlement, and it does so in writing.

4Create your letter

Fill in your details to get a ready letter, quoting the relevant rules, that you can send to your lender. It's marked "without prejudice", so it doesn't admit the amount claimed. Have a lawyer check it if you can.

5Send it so you have proof

The letter itself isn't proof. What the RBI Ombudsman, a consumer forum or a court will want to see is proof that the lender received it, and that depends on how you send it:

• Hand it in at the branch, with a second copy

  Very strong

  The lender's "received" stamp, signature and date on your copy (use the acknowledgement box on the printed letter)

• Registered Post or Speed Post

  Very strong

  The postal receipt, and the delivery record from India Post tracking

• Email to the lender's official grievance address

  Strong

  Your sent email with date and time, the lender's auto-reply, and any complaint ticket number. Keep the original emails, not just screenshots.

• The lender's online complaint form or app

  Strong

  The complaint reference number and confirmation. Save the confirmation page, email or SMS.

• Phone call, or speaking at the branch

  Weak

  Usually nothing you can show later. Always follow up in writing.

Keep everything together: your letter, proof of sending, the lender's replies and your loan documents. LoanReveal doesn't keep copies of your letters, so we can't confirm what you sent; the lender's stamp, the postal record or the lender's reference number is your proof. For court proceedings, electronic records such as emails may need extra formalities: ask a lawyer.

6Where to get help

The RBI Ombudsman handles service problems: for example, the bank not giving you copies of your documents or statement, or recovery agents harassing you. Write to the bank first; if it doesn't resolve the problem within 30 days, you can complain.

The Ombudsman doesn't decide whether you owe the money. Disputes about your liability as a guarantor, or about a release under the Contract Act, go to the DRT or a civil court, usually through a lawyer.

If you wrote to the lender about a service problem, track the Ombudsman dates here:

7Keep a case file

Record every step: when you wrote, how it was delivered, reference numbers and replies. Download it as a dated PDF timeline with a checklist of documents to attach, ready for your lawyer, legal aid office or the DRT.

Frequently asked questions