A Digital Lending App is the borrower-facing interface for a digital loan. A Lending Service Provider performs one or more lending functions for the RBI-regulated lender behind it.
The short answer
A Digital Lending App (DLA) is a mobile or web application that facilitates digital lending. A Lending Service Provider (LSP) is an agent that performs one or more digital lending functions for a regulated entity, such as customer acquisition, underwriting support, servicing, monitoring or recovery. The LSP may run the app, but the regulated entity remains the lender and remains responsible for compliance.
A borrower may interact entirely with an app carrying the LSP’s brand while the credit is actually sanctioned and disbursed by a bank or NBFC. RBI’s rules are designed to keep the lender visible, the money trail direct and the use of borrower data controlled.
On this page
DLA, LSP and RE explained
Digital Lending App
The interface
A mobile or web application, standalone or part of a wider app, that facilitates digital lending services.
Lending Service Provider
The service agent
An agent performing one or more digital lending functions, or part of them, for a regulated entity.
Regulated Entity
The lender
The RBI-regulated bank, co-operative bank, NBFC, housing finance company or all-India financial institution extending the credit.
A DLA describes technology; an LSP describes a commercial and operational role. An LSP can operate a DLA, an RE can operate its own DLA, and one DLA may display loan offers from more than one RE.
How a DLA–LSP–RE arrangement works
Follow the money, not only the app
Disbursal must ordinarily move directly from the RE to the borrower’s bank account, and repayment must move directly from the borrower to the RE. An LSP’s pass-through or pool account cannot ordinarily sit between them.
DLA or LSP? The practical difference
| Question | DLA | LSP |
|---|---|---|
| What is it? | An application or platform. | An entity acting as the RE’s service agent. |
| Can an RE own it? | Yes. An RE’s own app is also a DLA. | An RE may act as an LSP for another RE. |
| Can it face the borrower? | Yes—that is its core purpose. | Yes, when its assigned services include a borrower interface. |
| Can it sanction the loan? | An interface does not sanction credit by itself. | Not merely because it is an LSP; the RE extends the credit. |
| Who remains accountable? | The RE remains responsible for compliance by its DLA and engaged LSP. | |
What RBI requires
The Reserve Bank of India (Digital Lending) Directions, 2025 consolidate the conduct, disclosure, data and reporting requirements for digital lending by regulated entities.
| Requirement | What it means in practice | Owner |
|---|---|---|
| Written RE–LSP agreement | Clearly define roles, rights and obligations. | RE |
| Enhanced due diligence | Review technical capability, privacy and storage, borrower conduct, compliance ability and past record before appointment. | RE |
| Periodic monitoring | Review LSP conduct and portfolios originated with its support; act on deviations. | RE |
| Key Facts Statement | Provide the KFS, including APR and charges, before execution. | RE |
| Signed documents | KFS, sanction letter, terms, statements and relevant privacy policies must automatically reach the borrower. | Both |
| Grievance officer | The RE and borrower-facing LSP must prominently display a nodal grievance contact. | Both |
| Direct fund flow | No LSP pool or pass-through account for ordinary disbursal or repayment. | RE |
| DLA reporting | Report and update every owned or joined DLA on RBI’s CIMS portal, with compliance certification. | RE |
When one LSP works with multiple lenders
The DLA must show all matching offers and disclose unmatched lenders. Each matching offer must identify the RE and show the amount, tenor, APR, monthly repayment obligation, penal charges and a link to its KFS.
No dark patterns
The matching method must be consistent for similarly placed borrowers and products. The view must be unbiased and cannot push a particular lender through deceptive design. Ranking is permitted when the ranking metric is publicly disclosed in advance.
Data privacy and cybersecurity rules
| Control area | What the Directions require |
|---|---|
| Collection | Need-based data only, with prior explicit consent and an audit trail. |
| Phone permissions | No access to contact lists, call logs, telephony functions, files or media. One-time access to camera, microphone or location is permitted only when necessary for onboarding or KYC and explicitly consented to. |
| Borrower choice | Let the borrower deny specific consent, restrict third-party disclosure, revoke consent and request deletion where required. |
| LSP retention | An LSP should retain only limited basic data necessary to perform the contracted service. |
| Biometrics | Do not collect or store biometric data unless an applicable statutory framework permits it. |
| Data location | Store data in India. If processed outside India, delete it there and bring it back to India within 24 hours. |
| Privacy policy | Publish rules for collection, storage, retention, use, sharing, destruction and breach handling, including relevant third parties. These controls also sit alongside India’s wider DPDP Act requirements. |
| Technology standards | The RE and its LSPs must comply with cybersecurity requirements stipulated by RBI and other relevant agencies. |
Privacy compliance still needs security evidence
A privacy policy says what should happen. Access logs, encryption settings, API tests, vulnerability reports, consent records, deletion logs and vendor reviews show whether it actually happens.
Operational readiness checklist
- Inventory every DLA. Record its owner, associated REs and LSPs, URL, app-store links, activities and current CIMS status.
- Map the borrower journey. Trace acquisition, KYC, assessment, offer display, KFS, sanction, disbursal, servicing, repayment and recovery.
- Map the data journey. Record each field, permission, API, SDK, third party, storage location, retention period and deletion path.
- Test consent. Verify purpose-specific consent, audit trails, withdrawal, sharing restrictions and deletion.
- Secure the application. Run SAST, dependency and secret scanning, API security testing, DAST, mobile testing and VAPT before launch and after material changes.
- Secure the environment. Enforce MFA, least privilege, encryption, logging, monitoring, cloud posture checks, backups and incident response.
- Test borrower disclosures. Verify lender identity, KFS, APR, signed-document delivery, grievance contacts and recovery notices.
- Review LSPs. Track security posture, privacy controls, incidents, complaints, contract compliance and remediation evidence.
- Prepare certification evidence. Keep inventory, review records and control evidence ready for the official responsible for CIMS certification.
How Osto supports DLA and LSP readiness
Osto brings the security controls around a DLA into one operating view: API security, mobile application assessment, code scanning, dependency scanning, cloud posture management, vulnerability testing, endpoint controls and continuous compliance evidence. That lets an RE or LSP connect a regulatory requirement to the control implementing it and the evidence showing that the control is running.
For LSP oversight, the same evidence supports vendor due diligence and periodic review. For the DLA, findings from code, APIs, cloud and VAPT can be tracked through remediation instead of being left in separate reports.
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Frequently asked questions
What is a Digital Lending App?
A DLA is a mobile or web application with a user interface that facilitates digital lending. It may be operated by a regulated entity or an LSP engaged by that entity.
What is an LSP in digital lending?
An LSP is an agent of a regulated entity that performs one or more digital lending functions, such as customer acquisition, underwriting support, servicing, monitoring or recovery.
Is an LSP the same as the lender?
No. The RBI-regulated entity extends the credit and remains responsible for the outsourced activity. The borrower should be able to identify the actual lender behind each offer.
Can an LSP operate a DLA?
Yes. RBI’s definition includes DLAs operated by LSPs engaged by an RE as well as apps operated by the RE itself.
Can an LSP work with multiple lenders?
Yes. The DLA must display matching offers objectively, disclose unmatched lenders, use a consistent documented matching method and avoid dark patterns.
Can a DLA access contacts and call logs?
No. DLAs should not access contact lists, call logs, telephony functions, files or media. Limited one-time access to certain device facilities is allowed only when necessary for onboarding or KYC and with explicit consent.
Where must digital lending data be stored?
Data must be stored on servers in India. If processed outside India, it must be deleted from the overseas server and brought back to India within 24 hours.
Do DLAs have to be reported to RBI?
Yes. The RE must report all DLAs it deploys or joins, including LSP-operated DLAs, on RBI’s CIMS portal and keep the list updated.
Who is responsible if the LSP breaches a requirement?
The regulated entity remains fully responsible and liable for the acts and omissions of the LSP. Outsourcing does not dilute the RE’s obligations.