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ARTICLE · 17 MAY 2024

Regulatory Developments In The Digital Lending Space

AZB & Partners
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On April 26, 2024, the Reserve Bank of India (RBI) issued certain Frequently Asked Questions (FAQs) providing clarifications in relation to Guidelines on Default Loss Guarantee in Digital Lending...

IndiaFinance and Banking
Rohan Bagai
Rohan Bagai
Arjun Uppal
Arjun Uppal
Nikhil Sukhija
Nikhil Sukhija
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Clarifications on Default Loss Guarantee

On April 26, 2024, the Reserve Bank of India (RBI) issued certain Frequently Asked Questions (FAQs) providing clarifications in relation to Guidelines on Default Loss Guarantee in Digital Lending (DLG Guidelines).

Under the DLG Guidelines, issued on June 08, 2023, the RBI permitted Regulated Entities (REs) to enter into arrangements with third parties, including Lending Service Providers (LSPs) for default loss guarantee (DLG), which is also known as first loss default guarantee (FLDG) in the industry. In a DLG arrangement, such third-party guarantees to the RE loss arising due to default of repayment by borrower (DLG Provider).

The key takeaways of the FAQs are as under:

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