Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
Warning: Cannot modify header information - headers already sent by (output started at /home/sansjpuv/doerlife.com/index.php:1) in /home/sansjpuv/doerlife.com/wp-includes/rest-api/class-wp-rest-server.php on line 1831
{"id":13025,"date":"2023-06-14T14:24:03","date_gmt":"2023-06-14T14:24:03","guid":{"rendered":"https:\/\/doerlife.com\/?p=13025"},"modified":"2023-06-14T14:24:08","modified_gmt":"2023-06-14T14:24:08","slug":"rbi-issues-new-guidelines-allowing-first-loss-default-guarantee-fldg-in-digital-lending-bringing-clarity-to-fintech-bank-partnerships","status":"publish","type":"post","link":"https:\/\/doerlife.com\/rbi-issues-new-guidelines-allowing-first-loss-default-guarantee-fldg-in-digital-lending-bringing-clarity-to-fintech-bank-partnerships\/","title":{"rendered":"RBI Issues New Guidelines Allowing First Loss Default Guarantee (FLDG) In Digital Lending, Bringing Clarity To Fintech-Bank Partnerships."},"content":{"rendered":"\n
The Reserve Bank of India (RBI) has recently issued new guidelines regarding the use of First Loss Default Guarantee (FLDG) arrangements in digital lending. After being prohibited by the regulator last year, the FLDG model has been eagerly awaited by many fintech companies seeking clarity on their lending arrangements with banks. The FLDG model involves a lending partnership between a regulated bank or non-banking financial company (NBFC) and an often unregulated fintech or lending service provider, where the latter guarantees to compensate for a certain percentage of defaults in the loan portfolio.<\/p>\n\n\n\n
Under the new framework, the default cover provided by fintech platforms can be up to 5% of the loan portfolio and must be invoked within a maximum overdue period of 120 days. In the past, entities were offering almost 100% FLDG to their banking partners, exposing them to high risks if the fintech platforms lacked the financial resources to compensate for losses. The RBI now includes any other implicit guarantee linked to the loan portfolio’s performance under the definition of Default Loss Guarantee (DLG).<\/p>\n\n\n\n
To ensure transparency, lending service providers must publish the total number of portfolios and the respective amounts for which guarantee arrangements have been offered on their websites. Fintech companies are required to provide hard guarantees in the form of cash deposits, fixed deposits with a lien, or bank guarantees in favor of the lender. Additionally, RBI-regulated entities can only enter into DLG agreements with lending service providers or other regulated entities with whom they have an outsourcing agreement.<\/p>\n\n\n\n