Digital lending norms: Fintech firms seek clarity on RBI's FLDG stance

An FLDG is a lending model wherein a third-party guarantees to compensate up to a certain percentage of default in a loan portfolio of the regulated entity

The Reserve Bank of India’s (RBI’s) stance on first loss default guarantee (FLDG) in the recently-released digital lending norms has put fintech players, who use this model extensively, in a spot of bother.

They are now looking to approach the regulator, through their industry bodies, to seek clarity on this issue.

Last week, the RBI came out with detailed guidelines on digital lending.

It said when it comes to the industry practice of offering financial products involving contractual agreements, such as FLDG, regulated entities must adhere to provisions of the master direction on securitisation of standard assets, especially synthetic securitisation.

RBI has defined synthetic