The Reserve Bank of India (RBI) on June 08, 2023, issued the Guidelines on Default Loss Guarantee (DLG) in Digital Lending with reference to the RBI Press Release “Recommendations of the Working Group on Digital Lending – Implementation” dated August 10, 2022.
The arrangements between Regulated Entities (REs) and Lending Service Providers (LSPs) or between two REs involving default loss guarantee (DLG), commonly known as FLDG, has since been examined by the Bank and it has been decided to permit such arrangements subject to the guidelines laid down in the Annex to this circular. DLG arrangements conforming to these guidelines shall not be treated as ‘synthetic securitization’ and/or shall also not attract the provisions of ‘loan participation’.
The terms used and not defined in these guidelines will have the same meaning as assigned to them in the Circular on ‘Guidelines on Digital Lending’ dated September 02, 2022.
The guidelines shall come into effect from June 08, 2023.
[Notification No. RBI/2023-24/41 DOR.CRE.REC.21/21.07.001/2023-24]
