Failure to make repayment of the principal and interest on a debt to the lenders on the scheduled date is called:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Default
Not paying back a loan, its principal and interest, on the due date is a default. Farm loan default rates in India have been chronically high.
Option (1) Debt-trap — Incorrect. It is a state where a borrower can never clear the loan, as moneylenders kept poor farmers in a debt-trap.
Option (2) Collateral — Incorrect. It is an asset pledged as security for a loan.
Option (3) Default — Correct. It is the failure to repay on the scheduled date.
Option (4) Overdraft — Incorrect. It lets an account holder draw more than the balance. Jan-Dhan accounts give overdraft facilities of Rs. 10,000.
NCERT (2026-27): Glossary: “Default – Failure to make repayment of the principal and interest on a debt e.g. sovereign debt (loan obtained by the government) to the lenders, say, international financial institutions, on the scheduled date, causing loss of credibility as a debtor.” |