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JAIIB PPB Unit 31 — Contracts of Guarantee and Bank Guarantee: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 2 of the November 2026 cycle (22 November 2026)

This page is a free slice of our JAIIB PPB question bank for Unit 31 — Contracts of Guarantee and Bank Guarantee (Module B — Functions of Banks). The Mock Centre holds 54 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

PPB · Module B54 MCQs in the Mock Centre5 free belowPaper on 22 November 2026

Key facts examiners test from this unit

  1. Sec. 126: 3 parties (surety/PD/creditor), oral or written; consideration = the PD's benefit (Sec. 127 — past unrequested benefit fails); structure includes the implied PD-to-surety indemnity (Sec. 145).
  2. Liability: co-extensive (Sec. 128), secondary in nature; surety = favoured debtor; direct recourse without exhausting the PD (RBI 2014).
  3. Continuing guarantee (Sec. 129): revocation by notice (Sec. 130 — future only; the ₹200-bill illustration), death revokes prospectively (Sec. 131 — rule off the account against Clayton's).

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
A contract of guarantee is defined in:
Why (b): A contract of guarantee is defined in SECTION 126 of the Indian Contract Act — surety, principal debtor and creditor; indemnity sits at 124, the pair.
Question 2 of 5
The surety's liability (Sec. 128) is:
Why (a): The surety's liability (Section 128) is CO-EXTENSIVE with the principal debtor's — same extent: principal, interest and costs.
Question 3 of 5
A guarantee extending to a SERIES of transactions is a:
Why (b): A guarantee extending to a SERIES of transactions is a CONTINUING guarantee (Section 129) — the running-account guarantee behind cash-credit limits.
Question 4 of 5
The parties to a bank guarantee are:
Why (b): The parties to a bank guarantee are the APPLICANT (customer), the BENEFICIARY and the BANK — the BG triangle.
Question 5 of 5
The person in whose favour a BG is issued is the:
Why (d): The person in whose favour a BG is issued is the BENEFICIARY — the party who invokes and receives payment.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
Sec. 135 (time contract)Sec. 137 (forbearance)Discharges vs does not
Contract-time securities (141)Later securitiesLoss discharges pro tanto vs no effect
Practise all 54 questions on Unit 31. The free demo opens a slice of every subject with the same explanations; the PPB Online-only pass unlocks all 3,280 PPB questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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← Unit 30: Contracts of Indemnity · Unit 32: Letters of Credit → · All PPB units · JAIIB 2026 guide

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Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.