What is DLG?
Default Loss Guarantee (DLG) allows lenders to secure compensation from third parties for loan defaults.
Key RBI Guidelines:
✔ DLG is permitted only between Regulated Entities (REs) and Lending Service Providers (LSPs).
✔ LSPs must be incorporated under the Companies Act, 2013.
✔ No implicit guarantees or hidden agreements are allowed.
✔ DLG cap is limited to 5% of the loan portfolio.
✔ Strict due diligence and board approval are required.
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