A promise by a bank to pay a third party if its customer fails to meet an obligation.
Related terms in Loans & credit
Cash credit
A short-term working capital loan for businesses, usually secured by stock or receivables, which can be drawn up to a limit.
CIBIL score
A three-digit credit score from TransUnion CIBIL, ranging from 300 to 900. A higher score makes it easier to get a loan.
Collateral
An asset a borrower pledges to the lender as security for a loan. The lender can sell it if the loan is not repaid.
Consortium lending
When several banks together lend to one large borrower under common terms, led by one bank.
Credit guarantee (CGTMSE)
The Credit Guarantee Fund Trust for Micro and Small Enterprises guarantees collateral-free loans that banks give to small busines…
Credit Information Company (CIC)
A company licensed by RBI that collects credit data on borrowers and produces credit reports and scores.
Debt Recovery Tribunal (DRT)
A special tribunal for banks to recover loans of Rs 20 lakh and above quickly, under the Recovery of Debts and Bankruptcy Act, 19…
Digital lending
Loans given through apps or websites. RBI rules say the money must go straight from the lender to the borrower's account and the …
EBLR
External Benchmark-based Lending Rate. Since 1 Oct 2019, new floating-rate retail and MSE loans must be linked to an outside benc…
EMI
Equated Monthly Instalment. A fixed monthly payment that covers both interest and part of the principal.