First Loss Default Guarantee

On 8th June, 2023, the Reserve Bank (RBI) came out with guidelines on default loss guarantee (DLG) in digital lending, a move aimed at ensuring the orderly development of the credit delivery system.

  • As per the guidelines, a regulated entity(RE ) may enter into DLG arrangements only with a Lending Service Provider (LSP)/ other RE with which it has entered into an outsourcing (LSP) arrangement.
  • The LSP-providing DLG must be incorporated as a company under the Companies Act, 2013.

About Default Loss Guarantee (DLG)

  • It is also known as First Loss Default Guarantee (FLDG).
  • FLDG is a lending model between banks or ....
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