What changed
RBI consolidated all prior digital lending circulars into a single master direction, adding new requirements for LSPs partnering with multiple regulated entities and a mandatory directory of digital lending apps. The directions also introduce specific caps on loss-sharing arrangements with DLG providers and tighten data storage and privacy norms.
What it means for you
Banks and NBFCs must now ensure all LSPs undergo enhanced due diligence, especially when multiple lenders use the same LSP. The DLA directory will help RBI monitor apps, reducing rogue lending. Loss-sharing caps limit risk transfer to DLG providers, requiring lenders to retain more credit risk. Compliance timelines are staggered, with most rules effective immediately.
What you must do
- Review and update LSP due diligence policies to align with Chapter II requirements.
- Prepare for DLA directory reporting by June 15, 2025, ensuring all digital lending apps are registered.
- Assess current loss-sharing arrangements with DLG providers and ensure caps are within prescribed limits.
- Update loan disclosure templates to include cooling-off period and grievance redressal details as per Chapter III.
- Train compliance teams on new data privacy and technology standards under Chapter IV.
Who it affects
All commercial banks, Primary urban co-operative banks, State and central co-operative banks, NBFCs including housing finance companies, All-India financial institutions, Lending service providers (LSPs), Digital lending app operators
When do the new multi-lender LSP rules take effect?
Paragraph 6, covering RE-LSP arrangements involving multiple lenders, comes into effect from November 1, 2025. Other provisions are effective immediately from May 8, 2025.
What is the DLA directory and when must we report?
Paragraph 17 requires REs to report digital lending apps (DLAs) to RBI via the CIMS portal. This provision is effective from June 15, 2025. The directory aims to track and regulate all DLAs in the ecosystem.
Are there caps on loss-sharing arrangements with DLG providers?
Yes, Chapter VI specifies caps on default loss guarantee (DLG) arrangements. The exact cap details are in the directions; lenders must ensure DLG structures comply with these limits to avoid regulatory capital implications.