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Credit Facilities – Digital Lending Guidelines

Reserve Bank of India (RBI) has issued directions on credit facilities offered by various regulated entities. This article summarises the directions applicable to digital lending.

To whom shall the directions be applicable?

The directions shall be applicable to the following Regulated Entities (REs) –

  • Commercial Banks 
  • Small Finance Banks (SFBs)
  • Local Area Banks (LABs)
  • Regional Rural Banks (RRBs)
  • Primary (Urban) Co-operative Banks (UCBs)
  • Rural Co-operative Banks –
    • State Co-operative Banks (StCBs)
    • Central Co-operative Banks (CCBs)
  • All India Financial Institutions (AIFIs) regulated by RBI –
    • Export Import Bank of India (EXIM Bank)
    • National Bank for Agriculture and Rural Development (NABARD)
    • National Housing Bank (NHB)
    • Small Industries Development Bank of India (SIDBI)
    • National Bank for Financing Infrastructure and Development (NaBFID)
  • Non-Banking Financial Companies (NBFCs) for all layers –
    • Deposit taking NBFC (NBFC-D)
    • NBFC-Investment and Credit Companies (NBFC-ICC)
    • NBFC-Factor 
    • NBFC-Micro Finance Institutions (NBFC-MFI) 
    • NBFC-Infrastructure Finance Company (NBFC-IFC) 
    • Infrastructure Debt Fund-NBFC (IDF-NBFC) 
    • Housing Finance Company (HFC) 

To whom shall the directions be partially applicable?

The prudential regulations shall not be applicable for ‘NBFCs-Base Layer (NBFC-BL) having customer interface but not availing public funds’, however, conduct-related regulations shall be applicable for such NBFCs.

To whom shall the directions not be applicable?

The directions shall not be applicable to –

  • Mortgage Guarantee Company (MGC)
  • NBFC-Account Aggregator (NBFC-AA)
  • Standalone Primary Dealer (SPD) 
  • Non-Operative Financial Holding Company (NOFHC) 
  • NBFC not availing public funds and not having any customer interface

What is digital lending?

Digital lending means a remote and automated lending process, largely by use of seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer service.

Who is Lending Service Provider (LSP)?

Lending Service Provider (LSP) means an agent of an RE (including another RE) who carries out one or more of RE’s digital lending functions, or part thereof, in customer acquisition, services incidental to underwriting and pricing, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of the RE.

What are Digital Lending Apps / Platforms (DLAs)?

Digital Lending Apps / Platforms (DLAs) means a mobile and / or web-based applications, on a standalone basis or as a part of suite of functions of an application with user interface that facilitate digital lending services. DLAs shall include applications of the RE as well as those operated by LSP engaged by RE for extending any credit facilitation services.

What are the directions on arrangements involving multiple lenders?

In cases where an LSP has agreements with multiple REs for digital lending, each RE shall ensure the following –

  • LSP shall provide a digital view of all the loan offers matching the borrower’s request on the DLA. The name of the unmatched lenders shall also be disclosed in the digital view.
  • While the LSP may adopt any mechanism to match the request of borrowers with the lenders to offer a loan, it shall follow a consistent approach for similarly placed borrowers and products. 
  • The digital view of loan offers from matching lenders shall include the names of the lenders, amount and tenor of loan, Annual Percentage Rate (APR), monthly repayment obligation and penal charges (if applicable), in a way which enables the borrower to make a fair comparison between various offers. A link to the Key Fact Statement (KFS) shall also be provided in respect of each of the lender.
  • The content displayed by the LSP shall be unbiased, objective and shall not directly / indirectly promote or push a product of a particular lender, including the use of dark patterns / deceptive patterns designed to mislead borrowers into choosing a particular loan offer. However, ranking of loan offers based on a publicly pre-disclosed metric shall not be construed as promoting a particular product.

What is APR, KFS and dark patterns?

  • APR means the annual cost of credit to the borrower which includes interest rate and all other charges associated with the credit facility.
  • KFS means a statement of key facts of a loan agreement, in simple and easier to understand language, provided to the borrower in a standardised format.
  • Dark patterns shall mean any practices or deceptive design pattern using user interface or user experience interactions on any platform that is designed to mislead or trick users to do something they originally did not intend or want to do, by subverting or impairing the consumer autonomy, decision making or choice, amounting to misleading advertisement or unfair trade practice or violation of consumer rights.

What are the directions on disbursal, servicing and repayment?

  • RE shall ensure that there is no automatic increase in credit limit unless an explicit request is received from the borrower.
  • The borrower shall be given an explicit option to exit a digital loan by paying the principal and the proportionate APR without any penalty during an initial ‘cooling-off period’. The cooling-off period shall be determined by the RE, subject to the period so determined not being less than 1 day. 
  • RE may retain a reasonable one-time processing fee, if the customer exits the loan during the cooling-off period. This, if applicable, shall be disclosed to the customer upfront in KFS.
  • For borrower continuing with the loan even after cooling-off period, pre-payment shall be allowed.
  • Disbursement of loan by an RE shall always be made into the bank account of the borrower except for disbursals covered exclusively under statutory or regulatory mandate (of the RBI or of any other regulator), flow of money between lenders for co-lending transactions and disbursals for specific end use, provided the loan is disbursed directly into the bank account of the end-beneficiary. The RE shall ensure that in no case, disbursal is made to a third-party account, including the accounts of LSP.
  • RE shall ensure that all loan servicing, repayment, etc. is executed by the borrower directly in the RE’s account without any pass-through account / pool account of any third party, including the accounts of LSP.
  • The flow of funds between the bank accounts of the borrower and the RE shall not be controlled either directly or indirectly by a third-party, including the LSP.
  • RE shall ensure that any fees, charges, reimbursements, etc. payable to LSP are paid directly by the RE and are not charged to or collected from the borrowers separately by LSP.
  • In case of delinquent loans, an RE may deploy physical interface to recover loans in cash, wherever necessary. Such transactions are exempted from the requirement of direct repayment of loan in the RE’s account. However, any recovery by cash shall be duly reflected in full in the borrower’s account on the same day and the RE shall ensure that any fees, charges, etc., payable to LSPs for such recovery are paid directly by the RE and are not charged by LSP to the borrower either directly or indirectly from the recovery proceeds.

What are the directions on grievance redressal?

  • RE, and its LSP which has an interface with the borrower, shall designate nodal grievance redressal officers to deal with digital lending related complaints / issues raised by the borrower.
  • Contact details of the nodal grievance redressal officers shall be prominently displayed on the websites of the RE, its LSP and on the DLA, as well as in the KFS provided to the borrower.
  • The facility of lodging complaint shall also be made available on the DLA and on the website. 
  • The responsibility of grievance redressal shall continue to remain with the RE.
  • If any complaint lodged by the borrower against the RE or the LSP engaged by the RE – (a) is rejected wholly or partly by the RE, or (b) the borrower is not satisfied with the reply; or (c) the borrower has not received any reply within 30 days of receipt of complaint by the RE, the said borrower can lodge a complaint as below –

Commercial Banks, SFBs, LABs, RRBs, UCBs, NBFCs Over the Complaint Management System (CMS - https://cms.rbi.org.in/) portal under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS) or send a physical complaint to Centralised Receipt and Processing Centre (CRPC), RBI, Chandigarh.
Rural Co-operative Banks With NABARD or with the Customer Education and Protection Cell (CEPC) of the RBI.
AIFIs With CEPC of the RBI.

What is Default Loss Guarantee (DLG)?

Default Loss Guarantee (DLG) means a contractual arrangement, called by whatever name, between the RE and another entity, under which the latter guarantees to compensate the RE, for the loss due to default up to a certain percentage of the loan portfolio of the RE, specified upfront. Any other implicit guarantee of similar nature, linked to the performance of the loan portfolio of the RE and specified upfront, shall also be covered under the definition of DLG.

What are the directions on DLG?

  • RE may enter into DLG arrangements only with a LSP / other lender engaged as an LSP. 
  • RE shall accept DLG only in one or more of the following forms –
    • Cash deposited with the RE.
    • Fixed Deposit maintained with a Scheduled Commercial Bank with a lien marked in favour of the RE.
    • Bank Guarantee in favour of the RE.
  • RE shall ensure that the total amount of DLG cover on any outstanding portfolio which is specified upfront shall not exceed 5% of the total amount disbursed out of that loan portfolio at any given time. In case of implicit guarantee arrangements, the DLG provider shall not bear performance risk of more than the equivalent amount of 5% of the underlying loan portfolio.
  • Asset classification of individual loan assets and consequent provisioning requirement shall be as per the directions on Income Recognition, Asset Classification and Provisioning.
  • The amount of DLG invoked shall not be set off against the underlying individual loans, i.e. the liability of the borrowers in respect of the underlying loan shall remain unaffected.
  • Recovery by an RE, if any, from the loans on which DLG has been invoked and realised, can be shared with the DLG provider in terms of the contractual arrangement.
  • DLG amount once invoked by the RE shall not be reinstated, including through loan recovery.
  • RE shall invoke DLG within a maximum overdue period of 120 days, unless the loan dues are made good by the borrower before that.
  • The period for which the DLG agreement remains in force shall not be less than the longest tenor of the loan in the underlying loan portfolio.
  • In case, DLG provider is an RE, it shall deduct full amount of the DLG which is outstanding from its capital.

What are the exclusions from DLG?

  • RE shall not enter into DLG arrangements for revolving credit facilities offered through digital lending channel and credit cards.
  • RE shall not enter into DLG arrangements on the loans which are covered by the credit guarantee schemes administered by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Credit Risk Guarantee Fund Trust for Low Income Housing (CRGFTLIH) and National Credit Guarantee Trustee Company Ltd (NCGTC).
  • NBFC – P2P shall not enter into DLG arrangements for the loans facilitated over its platform.
  • Guarantees covered under the following schemes / entities shall not be covered within the definition of DLG –
    • Guarantee schemes of CGTMSE, CRGFTLIH and individual schemes under NCGTC.
    • Credit guarantee provided by Bank for International Settlements (BIS), International Monetary Fund (IMF) as well as Multilateral Development Banks.

What are the reporting requirements?

  • RE shall ensure that any lending done through their DLAs and / or DLAs of LSPs is reported by them to Credit Information Companies (CICs) irrespective of its nature / tenor.
  • Extension of structured digital lending products by an RE and / or LSPs engaged by the RE over a merchant platform involving short-term, unsecured / secured credits or deferred payments, need to be reported to CICs by the RE. 
  • RE shall report all DLAs deployed / joined by them, whether their own or those of the LSPs, either exclusively or as a platform participant, on the Centralised Information Management System (CIMS) portal of the RBI.
  • RE shall update the aforesaid list as and when additional DLAs are deployed or the engagement with the existing DLAs ceases to exist by filing the updated data in the CIMS portal.
  • The data, as submitted by the RE on CIMS, shall be published on the website of the RBI in an automated manner and the RBI shall not verify / validate the data submitted on CIMS. 
  • RE shall ensure that the inclusion of any third party DLAs deployed by them as part of above reporting, shall not be construed by the DLAs or any associated entity as conferring any form of registration, authorization, or endorsement by the RBI. The RE shall also ensure that such inclusion is not misrepresented in any marketing, promotional, or other materials issued by or on behalf of the DLAs.

What are the disclosure requirements?

  • RE shall ensure that digitally signed documents (on the letter head of the RE) viz., KFS, summary of loan product, sanction letter, terms and conditions, account statements, privacy policies of the RE / LSP with respect to storage and usage of borrowers’ data, etc. shall automatically flow to the borrower on the registered and verified email / SMS upon execution of the loan contract / transactions.
  • RE shall maintain a website which shall be kept up to date, inter alia, with the following details at a prominent single place on the website for ease of accessibility –
    • Details of all of its digital lending products and its DLAs.
    • Details of LSPs and the DLAs of the LSPs along with the details of the activities for which they have been engaged for.
    • Particulars of RE’s customer care and internal grievance redressal mechanism.
    • Link to the RBI’s CMS and Sachet Portal.
    • Privacy policies and other details.
  • RE shall ensure that DLAs / LSPs have links to the above website of the RE.
  • In case of a loan default, when a recovery agent is assigned for recovery or there is a change in the recovery agent already assigned, the particulars of such recovery agent shall be communicated to the borrower through email / SMS before the recovery agent contacts the borrower for recovery.
  • RE shall put in place a mechanism to ensure that LSPs with whom they have a DLG arrangement shall publish on their website the total number of portfolios and the respective amount of each portfolio on which DLG has been offered. The name of the lenders may or may not be disclosed. The disclosure shall be made on a monthly basis, within 7 working days following the conclusion of that month.


References

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (All India Financial Institutions – Credit Facilities) Directions, 2025 (updated as on April 1, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12981&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13156&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Local Area Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13078&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025 (Updated as on April 1, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12957&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Regional Rural Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13053&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Rural Co-operative Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13002&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13124&Mode=0

Reserve Bank of India. (2025, November 28). 'Reserve Bank of India (Urban Co-operative Banks – Credit Facilities) Directions, 2025 (Updated as on April 01, 2026)'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13028&Mode=0

Reserve Bank of India. (2026, April 27). 'Reserve Bank of India (Commercial Banks – Credit Facilities) Second Amendment Directions, 2026'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13395&Mode=0


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