RBI Guidelines on Default Loss Guarantee (DLG) in Digital Lending

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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