DLG Provisioning Rule: Fintech Pushback on RBI Norms
Why in the news
Fintech groups are unhappy that DLG cover cannot reduce provisioning on stressed loans, and are collecting data to present to RBI.
Key facts
- Regulated entities (REs) must provision fully on LSP-originated loans; setting off a DLG is prohibited.
- Deadline: 30 September 2025.
- DLG cover must not exceed 5% of the amount disbursed.
- Digital lenders must also offer multiple loan options; fintechs fear lower conversion.
Concerns and way forward
- Industry calls it capital-inefficient and likely to discourage LSP-based lending.
- Impact data will go to RBI before the deadline, seeking reconsideration.
- RBI is open to talks but keeps provisioning with REs.
- Possible effects: slower origination, higher capital needs, small fintechs hit hardest.
Exam angle
- DLG = Default Loss Guarantee; LSP = Loan Service Provider.
- Cap: 5%; date: 30 September 2025.