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JC - Legal Updates - Movement in FDLG model!

Legal Updates

09 Jun 2023

Movement in FDLG model!

Guidelines permitting Default Loss Guarantee (DLG) in digital lending has been introduced by RBI.
Technical Details:
RBI provides key stipulations under the guidelines:

  Eligibility: DLG arrangements only with a Lending Service Provider (LSP) or other RE with which it has an outsourcing (LSP) arrangement.

  Structure: DLG arrangements to be backed by an explicit legally enforceable contract covering specific details with respect to (i) extent (ii) form (iii) timeline for invocation (iv) certain disclosures on the website.

   Form: DLG can only be accepted in the form of (i) cash deposits, (ii) fixed deposits, and (iii) bank guarantees.

   Cap: Upfront DLG cover on any outstanding portfolio to be not more than 5% of the loan portfolio.

   Invocation: RE to invoke DLG within max overdue period of 120 days
The guidelines also specify the Recognition of NPA, Treatment of DLG for regulatory capital, Tenor, Disclosure Requirements, Due Diligence and Exceptions in relation to the DLG issuance and DLG provider.
For further details, please see:
For any queries/clarifications, please feel free to ping us and we will be happy to chat:

●   Mr. Ankit Sinha (ankit.sinha@jclex.com)
●   Mr. Saurabh Sharma (saurabh.sharma@jclex.com)
●   Ms. Rupul Jhanjee (rupul.jhanjee@jclex.com)