Select RBI circulars May 2025

In this document we have covered the select RBI notifications and directives for the month of May 2025 and produced a gist of it. For detailed and full study, link is provided that will take us to the RBI communication.

NOTIFICATIONS:

1. RBI/2025-26/36 DOR.STR.REC.19/21.07.001/2025-26 dated 08.05.2025

Subject: Reserve Bank of India (Digital Lending) Directions, 2025

https://website.rbi.org.in/documents/d/rbi/directionsondigitallending

Gist:

Effective from: 8^th May, 15^th June, 1^st Nov 2025

Annual Percentage Rate (APR): is the annual cost of credit to the borrower that includes interest and other charges.

Default Loss Guarantee (DLG): is a contractual agreement between a RE and another entity wherein the other party guarantees to compensate a specific amount of loss due to default.

Lending Service Provider (LSP):is an agency of RE who carries out RE’s Degital Lending functions or a part of it.

Cooling off period: The borrower shall be given an explicit option to exit a digital loan by paying the principal and the proportionate APR without any penalty during an initial “cooling off period”. RE may retain a one time processing fee.

If any complaint lodged by the borrower against the RE or the LSP engaged by the RE is rejected wholly or partly by the RE, or the borrower is not satisfied with the reply; or the borrower has not received any reply within 30 days of receipt of complaint by the RE, the said borrower can lodge a complaint over the Complaint Management System (CMS) portal under the Reserve Bank-Integrated Ombudsman Scheme (RB-IOS) or send a physical complaint to “Centralised Receipt and Processing Centre, Reserve Bank of India,

RE shall ensure that LSP engaged by them do not store personal information of borrower except some basic minimal data (viz., name, address, contact details of the customer, etc.). No biometric data to be stored/collected. Data should be stored in servers located in India.

RE shall report all DLAs deployed/ joined by them, on the Centralised Information Management System (CIMS) portal of RBI.

Restriction on entering into DLG agreement:

• RE shall not enter into DLG arrangements for revolving credit facilities offered through digital lending channel and credit cards.
• RE shall not enter into DLG arrangements on the loans which are covered by the credit guarantee schemes.
• NBFC – P2P shall not enter into DLG arrangements for the loans facilitated over its platform

[Author’s note: P2P lending allows individuals to lend to another without involvement of a bank.]

Structure of DLG agreement:

• Extent of DLG cover
• Form in which DLG cover is to be maintained with the RE
• Timeline for DLG invocation
• Disclosure requirements.

Forms of DLG:

RE shall accept DLG only in one or more of the following forms:

• Cash deposited with the RE;
• Fixed Deposit maintained with a Scheduled Commercial Bank with a lien marked in favour of the RE;
• Bank Guarantee in favour of the RE.

Total amount of DLG should not exceed 5% of the disbursed portfolio.

Invocation and tenor of DLG

• RE shall invoke DLG within a maximum overdue period of 120 days,
• The period for which the DLG agreement remains in force shall not be less than the longest tenor of the loan in the underlying loan portfolio.

• RBI/2025-26/35 FMRD.FMD.No.01/14.01.006/2025-26 dated 08.05.2025

Subject: Investments by Foreign Portfolio Investors in Corporate Debt Securities through the General Route – Relaxations

https://website.rbi.org.in/documents/d/rbi/covercircular_may082025-1-

Gist:

• With regard to the investments by FPIs, Govt has removed the limits of short term investment and Concentration limits.

• Security wise limits continued i.e Investments by FPIs and investments made through the Special Rupee Vostro Account Route, in aggregate, in any Central Government security shall not exceed 30 per cent of the outstanding stock of the security.

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