RBI Unveils Guidelines on Default Loss Guarantee in Digital Lending
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- By Chetan Kulasri
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- Last Updated on 12 June, 2023
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Circular No. RBI/2023-24/41 DOR.CRE.REC.21/21.07.001/2023-24, Dated: 08.06.2023
RBI has issued guidelines on default loss guarantee (DLG) in digital lending with a view to ensuring the orderly development of credit delivery system. DLG is a contractual arrangement between a regulated entity (RE) and an entity meeting prescribed norms, under which the latter guarantees to compensate the RE, loss due to default up to a certain percentage of the loan portfolio specified upfront. DLG arrangements must be backed by an explicit legally enforceable contract between RE and DLG provider.
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