In the context of RBI's framework for digital lending, what is the current stance on First Loss Default Guarantee (FLDG) arrangements between Regulated Entities (REs) and Lending Service Providers (LSPs) as of 2026?
A FLDG arrangements are completely prohibited to prevent moral hazard.
B FLDG arrangements are permitted, provided the guarantee is backed by a deposit or bank guarantee from the LSP, up to a certain percentage of the loan portfolio.
C LSPs can provide unlimited FLDG to REs without any collateral.
D FLDG is only allowed for loans below a certain threshold amount.
Answer: B
The RBI, in its June 2023 circular, permitted FLDG arrangements between REs and LSPs, subject to certain conditions. The guarantee must be backed by a deposit or bank guarantee from the LSP, and the total FLDG cover on any portfolio should not exceed 5% of the amount of the loan portfolio. This ensures that LSPs have skin in the game while mitigating risks for REs.
92.
Under the RBI's framework for digital lending, what is a mandatory requirement regarding data collection by Digital Lending Apps (DLAs)?
A DLAs can access a borrower's mobile phone resources like contacts, call logs, and media gallery for credit assessment.
B DLAs must obtain explicit consent from borrowers for specific data access, avoiding unnecessary data.
C Borrowers are not required to provide consent for data access if it's for improving credit scores.
D Data collected by DLAs can be shared with third-party marketing agencies without borrower's approval.
Answer: B
The RBI framework strictly mandates that Digital Lending Apps (DLAs) must obtain explicit consent from borrowers for specific data access (e.g., camera, microphone, location) and avoid accessing unnecessary data. Access to contact lists, call logs, or media galleries is generally prohibited.
93.
Which of the following is a key provision of the Reserve Bank of India's (RBI) framework for digital lending, effective by 2026?
A All loan disbursals and repayments must be executed directly between the borrower and the Regulated Entity (RE).
B Lending Service Providers (LSPs) are permitted to handle loan disbursals and repayments on behalf of REs.
C Digital lending apps can access a borrower's contact list and call logs without explicit consent.
D There is no mandatory cooling-off period for digital loans.
Answer: A
The RBI's digital lending guidelines mandate that all loan disbursals and repayments must be executed directly between the borrower and the Regulated Entity (RE) without any pass-through by LSPs or any third party. This ensures transparency and accountability.
94.
In June 2023, the RBI clarified its stance on First Loss Default Guarantee (FLDG) arrangements in digital lending. What is the maximum permissible cap for FLDG arrangements, as a percentage of the loan portfolio, when entered into by Regulated Entities (REs)?
A 2%
B 5%
C 10%
D 15%
Answer: B
The RBI, in its June 2023 circular, permitted FLDG arrangements between Regulated Entities and Lending Service Providers, subject to a maximum cap of 5% of the loan portfolio, to balance innovation with risk management.
95.
Which of the following documents is mandated by the RBI's digital lending guidelines to be provided to the borrower before the execution of a loan contract, ensuring transparency regarding loan terms?
A Credit Information Report
B Key Fact Statement (KFS)
C Annual Financial Statement
D Loan Sanction Letter
Answer: B
The Key Fact Statement (KFS) is a mandatory document under RBI's digital lending guidelines, providing borrowers with clear and concise information about the loan terms, including interest rates, fees, and other charges, before they commit to the loan.
96.
According to the RBI's guidelines on digital lending, all loan disbursals and repayments must be executed directly between the borrower and which of the following entities?
A Digital Lending Apps (DLAs)
B Loan Service Providers (LSPs)
C Regulated Entities (REs)
D Third-party payment aggregators
Answer: C
The RBI's digital lending guidelines mandate that all loan disbursals and repayments must be executed directly between the borrower and the Regulated Entity (RE) to ensure transparency and accountability.
97.
Which of the following is a primary objective behind the RBI's introduction of the Scale-Based Regulation (SBR) framework for NBFCs?
A To reduce the number of NBFCs in India
B To promote competition among small NBFCs
C To enhance financial stability and mitigate systemic risks
D To simplify compliance requirements for all NBFCs
Answer: C
The primary objective of SBR is to enhance financial stability by aligning the regulatory framework with the systemic importance and risk profile of NBFCs, thereby mitigating potential systemic risks.
98.
Under the RBI's Scale-Based Regulation (SBR) framework, which layer of NBFCs is identified as requiring enhanced regulation, akin to banks, due to their significant systemic importance?
A Base Layer
B Middle Layer
C Upper Layer
D Top Layer
Answer: C
The Upper Layer (NBFC-UL) comprises NBFCs identified as requiring enhanced regulation, similar to banks, due to their significant systemic importance and potential for systemic risk.
99.
The Reserve Bank of India (RBI) introduced the Scale-Based Regulation (SBR) framework for Non-Banking Financial Companies (NBFCs). How many layers does this regulatory framework categorize NBFCs into?
A Three
B Four
C Five
D Two
Answer: B
The SBR framework categorizes NBFCs into four layers: Base Layer, Middle Layer, Upper Layer, and Top Layer, with increasing regulatory intensity based on their size, activity, and perceived risk.
100.
Following a merger of Public Sector Banks, the merged entity typically operates under a new name and branding. Which regulatory body in India approves the name change and branding of such merged entities?
A Securities and Exchange Board of India (SEBI)
B Reserve Bank of India (RBI)
C Ministry of Finance, Government of India
D Competition Commission of India (CCI)
Answer: C
While the RBI plays a crucial role in bank mergers and approvals, the final decision and approval for the name change and branding of a merged Public Sector Bank, especially concerning government ownership and policy, typically comes from the Ministry of Finance, Government of India.
