**Executive Summary**
This document, issued by the Reserve Bank of India (RBI) on February 13, 2026, pertains to amendments to the Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025. The key change involves the provisioning for portfolios covered by Default Loss Guarantee (DLG) arrangements. The amendment came into force immediately.
**Key Points / Main Content**
* **Default Loss Guarantee (DLG) Arrangements:**
* DLG arrangements, otherwise treated as "synthetic securitization" and prohibited, were previously permitted in limited cases for digital lending (June 08, 2023) and co-lending arrangements (August 06, 2025).
* **Amendment Directions:**
* New paragraphs 36A, 36B and 36C are inserted related to provisioning for portfolios covered by DLG arrangements.
* NBFCs may consider the DLG for determining provisions under the Expected Credit Loss framework subject to Indian Accounting Standards requirements, provided the DLG arrangement is integral to the loan's contractual terms.
* The DLG should not be recognised separately.
* NBFCs must comply with IndAS 1 disclosure requirements.
* Upon invocation of DLG, NBFCs must recompute their ECL provisioning requirements across stages, adjusting for the reduced DLG cover.
* **Consequential Amendments:**
* Consequential amendments have been made vide Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Amendment Directions, 2026 dated February 13, 2026.
**Impact Analysis**
**Stakeholder: Non-Banking Financial Companies (NBFCs)**
**Impact:**
NBFCs are impacted by the new guidelines on provisioning for portfolios covered by Default Loss Guarantee (DLG) arrangements and NBFCs must incorporate the new requirements in their accounting and disclosure practices.
**Action Required:**
* NBFCs must align their provisioning calculations with the new guidelines, considering the DLG arrangement within the Expected Credit Loss framework.
* NBFCs must ensure compliance with IndAS 1 disclosure requirements related to DLG arrangements.
* NBFCs must recompute their ECL provisioning requirements upon DLG invocation.
Key Entities Referenced
Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Amendment Directions, 2026: The primary subject of the document, amending existing directions related to income recognition, asset classification, and provisioning for Non-Banking Financial Companies.
Default Loss Guarantee (DLG): A key financial arrangement that the directions address, specifically concerning provisioning for portfolios covered by DLG arrangements.
Reserve Bank of India Act, 1934: The Act that provides the Reserve Bank of India with the powers to issue these directions.
Reserve Bank of India: The regulator issuing the directions for NBFCs.
Reserve Bank of India (Non-Banking Financial Companies – Income Recognition, Asset Classification and Provisioning) Directions, 2025: The original directions being amended by this document.
भारतीय ररज़र्व बैंक
RESERVE BANK OF INDIA
_________________________ ______________________
www.rbi.org.in
RBI/2025-26/210
DOR.STR.REC.413/21-07-001/2025-26 February 13, 2026
Reserve Bank of India (Non-Banking Financial Companies – Income
Recognition, Asset Classification and Provisioning) Amendment Directions,
2026
Please refer to Reserve Bank of India (Non-Banking Financial Companies – Income
Recognition, Asset Classification and Provisioning) Directions, 2025 (hereinafter
referred to as ‘the Directions’).
2. Default Loss Guarantee (DLG) arrangements which are otherwise treated as
‘synthetic securitisation’ and are prohibited, were permitted in the limited case of digital
lending vide circular dated June 08, 2023. Subsequently, the same was also permitted
for co-lending arrangements vide Directions issued on August 06, 2025.
3. On a review, to ensure consistency in application of prudential principles, in exercise
of the powers conferred by the Chapter III B of the Reserve Bank of India Act, 1934
and all other laws enabling the Reserve Bank in this regard, the Reserve Bank being
satisfied that it is necessary and expedient in the public interest so to do, hereby issues
the Amendment Directions hereinafter specified.
4. These Amendment Directions modify the Directions as under:
New paras 36A, 36B and 36C shall be inserted as below:
“C1. Provisioning for portfolios covered by Default Loss Guarantee (DLG)
arrangements
36A. For loan portfolios covered by Default Loss Guarantee (DLG)
arrangements in terms of Chapter III of the Reserve Bank of India (Non-
Banking Financial Companies – Credit Facilities) Directions, 2025 and Part B
of the Reserve Bank of India (Non-Banking Financial Companies – Transfer
विवियमि विभाग, केंद्रीय कायाालय, केंद्रीय कायाालय भिि, 12िी/ीं 13िी ींमींव़िल, शहीद भगत व ींह मागा, फोर्ा, म ींबई - 400001
र्ेलीफोि/ Tel No: 22661602, 22601000 फैक्स/ Fax No: 022-2270 5691
Department of Regulation, Central Office, Central Office Building, 12th/ 13th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai – 400001
हहदिं ी आसान ह,ैं इसका प्रयोग बड़ाइएand Distribution of Credit Risk) Directions, 2025 both dated November 28,
2025, an NBFC may consider the DLG for determining provisions under the
Expected Credit Loss framework across all stages, subject to the requirements
as laid down under Indian Accounting Standards, which inter alia require the
DLG arrangement to be integral to the contractual terms of the loan and the
DLG not being recognised separately.
36B. An NBFC shall comply with the disclosure requirements as prescribed
under IndAS 1.
36C. Since upon every event of invocation of DLG, the DLG cover reduces to
the extent of invocation, an NBFC shall recompute their ECL provisioning
requirements across stages, after duly adjusting for the reduced DLG cover.”
5. Consequential amendments have also been made vide Reserve Bank of India (Non-
Banking Financial Companies – Credit Facilities) Amendment Directions, 2026 dated
February 13, 2026.
6. The above amendment shall come into force immediately.
(Vaibhav Chaturvedi)
Chief General Manager
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