RBI Tightens Digital Lending Norms: LSPS Must Publish DLG Portfolio Details

Image Source: Kashmir Observer

The Reserve Bank of India (RBI) has issued new directives requiring Lending Service Providers (LSPs) to publicly disclose their Default Loss Guarantee (DLG) portfolio details. This move aims to enhance transparency in digital lending and ensure better risk management practices across the sector.

The latest guidelines mandate that regulated entities (REs) and LSPs involved in digital lending must publish comprehensive details of their DLG arrangements, including risk-sharing mechanisms and financial exposure. The RBI clarified that such arrangements will not be classified as synthetic securitization, ensuring compliance with existing financial regulations.

Industry experts believe this directive will strengthen consumer trust in digital lending platforms while reducing hidden risks associated with loan guarantees. The central bank’s decision aligns with its broader efforts to regulate fintech operations and safeguard borrowers from opaque lending practices.

Key Highlights:

RBI mandates LSPs to disclose DLG portfolio details for transparency.
DLG arrangements will not be treated as synthetic securitization, ensuring regulatory compliance.
Move aims to enhance risk management and consumer trust in digital lending.
Regulated entities must publish financial exposure and risk-sharing mechanisms.

Source: RBI Official Notification | Economic Times | Business Standard