Digital lenders seek cap on default loss guarantee models from RBI

They suggested that the central bank could look at a reasonable cap to the FLDG models, given RBI's concerns of around build-up of systemic risk and 100% risk transfer rather than banning it outright

At a meeting with the Reserve Bank of India (RBI) governor earlier this week, Digital Lenders Association of India (DLAI) – the industry association for digital lenders – raised the issue of first loss default guarantee (FLDG).

They suggested that the central bank could look at a reasonable cap to the FLDG models, given RBI’s concerns of around build-up of systemic risk and 100 per cent risk transfer rather than banning it outright, sources aware of the development said.

In a note to its members, DLAI said it apprised the RBI of the importance of FLDG as such risk-sharing models