Mumbai: The Reserve Bank of India (RBI) on Friday issued frequently asked questions (FAQs) to provide more clarity on its guidelines for default loss guarantee (DLG) in digital lending, which were first issued in June 2023.
DLG is an agreement between the bank and an entity under which the latter guarantees to provide compensation to the bank for losses due to default up to a certain percentage of the loan portfolio of the bank.
While issuing the guidelines in June 2023, the RBI had said that banks must ensure that the total amount of DLG cover on any outstanding portfolio -- which is specified upfront -- shall not exceed five per cent of the amount of that loan portfolio.
In its list of FAQs, the RBI said the portfolio for which DLG can be offered needs to consist of identifiable and measurable loan assets.