Digital Lending
This domain tests RBI's Digital Lending Guidelines (2022) and the default-loss-guarantee rules - how credit can be originated digitally without the lender losing control of funds, data or conduct.
Core rules
- Lending must be by a regulated entity, directly or through an LSP under a disclosed agreement. The LSP never handles funds: disbursal and repayment flow directly between the borrower's bank account and the regulated entity.
- A Key Fact Statement in the prescribed format is mandatory before contract execution - sanctioned limit, APR including all charges, tenor, EMI, processing fee, penal charges, cooling-off, grievance redressal and LSP details.
- A cooling-off or look-up period allows exit by repaying principal plus proportionate APR without penalty; the minimum scales with ticket size (shortest for loans up to ₹1,000, longer for loans above ₹1 lakh).
- Apps may not access contacts, photos, media or files, and borrower data must be minimal, consent-based with an audit trail, revocable, and stored in India.
- Default loss guarantee is capped at 5% of the loan portfolio of the regulated entity and must be backed by cash, fixed deposit or bank guarantee. Penal charges are levied as charges, never compounded as interest.
Worked example
A borrower takes a ₹50,000 digital loan. The KFS must show the APR inclusive of processing fee before signing. The cooling-off period applies, during which the borrower exits by repaying principal plus proportionate interest with no penalty. The LSP may not debit the account; the regulated entity raises the mandate. Recovery is through authorised agents only, with call recording. Any shortfall against the DLG cap is absorbed by the regulated entity.
Traps that cost marks
Allowing the LSP to pool or route funds. Treating the KFS as a post-disbursal formality. Quoting a 10% FLDG. Assuming cooling-off can be waived by consent. Confusing an LSP arrangement with the Co-Lending Model (80:20), which has separate rules.