**Executive Summary**
These Amendment Directions, issued by the Reserve Bank of India on February 13, 2026, modify the existing Directions concerning Income Recognition, Asset Classification, and Provisioning for Non-Banking Financial Companies (NBFCs). The amendments pertain to the treatment and provisioning of portfolios covered by Default Loss Guarantee (DLG) arrangements. These amendments come into force immediately.
**Key Points / Main Content**
* **Default Loss Guarantee (DLG) Arrangements:**
* DLG arrangements, previously considered "synthetic securitisation" and generally prohibited, were initially permitted for digital lending and co-lending arrangements.
* **Amendments:**
* New paragraphs 36A, 36B, and 36C are inserted to address provisioning for portfolios covered by DLG arrangements.
* Under specified conditions NBFCs may consider the DLG for determining provisions under the Expected Credit Loss framework
* **Provisioning for Portfolios Covered by DLG:**
* For loan portfolios covered by DLG arrangements, an NBFC may consider the DLG for determining provisions under the Expected Credit Loss (ECL) framework.
* The DLG arrangement must be integral to the contractual terms of the loan and not recognized separately.
* **Disclosure Requirements:**
* NBFCs must comply with disclosure requirements as prescribed under IndAS 1.
* **DLG Invocation and ECL Recomputation:**
* Upon invocation of DLG, the DLG cover reduces, and NBFCs must recompute their ECL provisioning requirements, adjusting for the reduced DLG cover.
* **Consequential Amendments:**
* Consequential amendments have also been made to the 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 must adhere to the new guidelines for provisioning loan portfolios covered by Default Loss Guarantee (DLG) arrangements.
* **Action Required:** NBFCs must review and implement changes to their provisioning models to align with the amended directions, ensuring compliance with disclosure requirements and properly accounting for DLG arrangements when calculating Expected Credit Loss (ECL). They also need to recompute their ECL provisioning requirements after every invocation of DLG.
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, outlining amendments related to income recognition, asset classification, and provisioning for Non-Banking Financial Companies.
Default Loss Guarantee (DLG): A key concept related to provisioning for loan portfolios, which is addressed and modified by the directions.
Reserve Bank of India Act, 1934: The Act that grants the Reserve Bank of India the authority to issue these directions.
Reserve Bank of India: The regulator issuing the directions.
Reserve Bank of India (Non-Banking Financial Companies – Credit Facilities) Directions, 2025: Directions referred to concerning loan portfolios covered by Default Loss Guarantee (DLG) arrangements
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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