RBI approves FLDG, key to partnership between fintechs & banks/NBFCs

This is the first time that the banking regulator has explicitly approved such a product.

The Reserve Bank of India (RBI) has approved the First Loss Default Guarantee (FLDG) program, a popular product that fintechs in the country use to form partnerships with banks and non-banking financial companies (NBFCs).

The RBI had said in its Digital Lending Guidelines last year that it was not opposed to the idea of digital lending. This is the first time that the banking regulator has explicitly approved such a product.

FLDG helped banks and NBFCs cover potential losses, as well as gave them confidence that fintechs understand credit risk. Under FLDG, fintechs recoup losses that occur to banks or NBFCs when customers default on payments.

This is a developing story…