Digital Lending Guidelines - 2025

Digital Lending Guidelines

May 2025

RBI’s Unified Digital Lending Framework: A Milestone for Responsible Growth

With digital lending volumes scaling rapidly in India, the Reserve Bank of India (RBI) has consolidated its prior directives into a single, coherent framework as Digital Lending Guidelines (DLG) 2025. Replacing circulars from 2020, 2022, and 2023, this unified direction strengthens consumer protection, brings consistency in compliance, and promotes long-term digital lending resilience.

Key Highlights of the Digital Lending Guidelines 2025

🔍 Consolidated Scope of Application:
The guidelines now apply to all digital lending arrangements involving term loans disbursed through online channels. This includes lending journeys where any part—from application to servicing—is digital. However, certain exclusions are clearly specified: credit cards are regulated separately under debit and credit card norms; Peer-to-Peer (P2P) lending and merchant Buy Now Pay Later (BNPL) products are also out of scope. This delineation helps regulated entities (REs) focus their compliance efforts more precisely.

📊 Marketplace Neutrality & Multi-Lender Disclosure:
One of the most critical changes is the requirement for LSPs to act as fair, unbiased facilitators. LSPs must now transparently list all matched and unmatched lenders for every borrower journey. Each offer must disclose the Annual Percentage Rate (APR), tenure, EMI amount, processing charges, and the RE’s name. Dark patterns, manipulative ranking orders, and opaque exclusions are explicitly banned.

🧾 Cooling-Off Period Standardization:
To ensure customer autonomy post-loan sanction, DLG 2025 introduces a board-approved cooling-off period—mandated to be at least one calendar day. This allows borrowers to reconsider their decision without penalty, irrespective of loan tenure or channel.

📄 Key Fact Statement (KFS) & Consent Architecture:
The revised KFS format standardizes how loan terms, charges, and repayment obligations are presented. Alongside, REs and LSPs must establish granular, purpose-specific consent frameworks that allow borrowers to revoke permissions and request data deletion. This ensures higher control over personal and transactional data.

📥 Governance, Compliance & Auditability:
DLAs (Digital Lending Apps) used by REs or LSPs must be registered with RBI’s Centralized Information Management System (CIMS). Moreover, the Chief Compliance Officer (CCO) of each RE is accountable for certifying that all digital lending workflows comply with DLG 2025.

💸 DLG (Default Loss Guarantee) Clarification:

Capped at 5% of the disbursed portfolio.
Permitted instruments include cash, fixed deposits, or bank guarantees.
Must be invoked within 120 days of default.
DLG must complement—not replace—robust credit underwriting.

The Digital Fifth’s Perspective

We view the DLG 2025 as a necessary and forward-looking regulatory milestone. It not only safeguards borrowers but also demands that the industry mature its digital infrastructure, governance, and journey design.

As shared in our webinar, the focus must shift from tactical compliance to strategic alignment. Digital lenders must invest in consent orchestration, modular KFS systems, and governance dashboards that deliver both compliance and control.

In our advisory work with REs and fintechs, we continue to emphasize:

Clean, API-driven architecture for disclosures and consent management.
Reusable KYC/KFS layers that reduce redundancy and improve UX
Institutional readiness for audit trails, DLA registration, and cooling-off logic.
Strengthened focus on data governance and the protection of customer Personally Identifiable Information (PII).
Adopted a customer-first approach, ensuring transparency and fairness in digital lending practices.

The Digital Fifth recently hosted an expert-led webinar to unpack these changes, with over 250 participants from across the BFSI and fintech ecosystem. Key themes included operational implications, market design shifts, and how lenders can turn compliance into a competitive advantage.

Need assistance on your current programs with DLG guidelines.

Digital Lending Webinar (Q&A)

Q1: How should unmatched loan offers be displayed when an LSP works with multiple lenders?
The LSP must disclose all matched and unmatched loan offers clearly, with full transparency on lender names, APR, loan amount, tenure, repayment, and charges. This ensures a fair marketplace-like experience for the customer. Even if 10 lenders are integrated, the LSP must show those who declined the loan as “unmatched” without misleading representations.

Q2: Can customer ranking be based on internal logic or partner incentives?
No. Ranking based on biased parameters or using dark patterns is strictly prohibited. Lenders and LSPs must build publicly defined, customer-first criteria—such as lowest APR, longer tenure, or higher eligible loan amount. Transparent logic must be displayed to avoid regulatory scrutiny.

Q3: Is pre-screening of customers by LSPs still permitted?
Yes, pre-screening is permitted and continues to be a practical necessity. However, regulators expect that it is not used to manipulate results. Pre-screening should be based on limited information and should not bypass or replace RE’s underwriting process. Offers can evolve post hard pull and further KYC/compliance stages.

Q4: Can a loan be disbursed into an LSP’s nodal or escrow account?
Absolutely not. All disbursements must go directly to the borrower or, in the case of specific end-use products (like consumer durables), to the merchant. No LSP can have custody or control of loan proceeds at any stage.

Q5: Can LSPs or fintechs charge onboarding or platform service fees to customers?
If fees are tied directly to loan facilitation, they are not permitted. However, if the LSP offers a standalone value-added service (like credit scores or property intelligence tools), charging a nominal fee may be acceptable. These must be clearly separated from lending services to avoid classification as indirect loan charges.

Q6: How should regulated entities (REs) rank lenders if a borrower already has an existing relationship with one of them?
A customer’s existing RE can be prioritized if the ranking logic is clearly declared upfront. For example, if the system ranks lenders based on “existing relationships” or “APR”, it must be part of a transparent, published methodology.

Q7: Are there special considerations for co-borrower journeys in digital lending platforms?
While not explicitly covered in the guidelines, digital journeys must handle co-borrower data sensitively, ensuring separate consent for both borrowers. Many platforms allow Aadhaar-based onboarding followed by e-KYC and video KYC for each applicant.

Q8: Can Account Aggregators (AAs) act as LSPs?
AAs themselves cannot act as LSPs. However, regulated entities that use AA frameworks for data access and decision-making must still comply with all DLG norms if they perform LSP functions like sourcing, underwriting support, or servicing.

Digital Lending Guidelines - 2025