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RBI Allows DLGs Again in NBFC Loan Loss Provisioning

16 February 20261 min read
BANKING & FINANCERBI Allows DLGsAgain in NBFCLoan LossProvisioning16 February 2026safalsetu.com

Why in the news

RBI reversed its earlier curbs, letting NBFCs count Default Loss Guarantees (DLGs) again when setting aside provisions.

The decision

  • DLGs may be factored into provisioning if integral to the loan structure.
  • Loss estimates must be revised every time the guarantee is invoked.
  • Applies immediately.

Earlier 2025 rule

NBFCs had to ignore fintech-provided DLGs and make full provisions. Result: higher credit costs, lower profits, fewer digital loans.

About DLGs

  • A risk-sharing deal in digital lending: a fintech partner covers an agreed part of defaults.
  • Usually capped near 5% of the portfolio; often backed by fixed deposits.

Exam angle

  • Regulator: RBI; users: NBFCs with fintech partners.

Test yourself

1. RBI restored the use of DLGs for which type of lenders in loan loss provisioning?

RBI allowed NBFCs to factor in Default Loss Guarantees again.

2. A Default Loss Guarantee is usually capped at around what share of the loan portfolio?

DLGs are usually capped at around 5% of the loan portfolio.

3. What must lenders do each time a DLG is invoked under RBI's revised framework?

Lenders must revise loss estimates as available protection declines.

This topic is part of Daily Current Affairs 15 & 16 February 2026 (16 topics).

All topics of the dayDay quizFebruary 2026

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