The FLDG Circular is out and everyone will have to play ball. The FinTechs can now guarantee up to 50 lakh rupees of losses on these loans. This might mean the NBFCs and banks could pay a bit more attention To the credit quality of customers that FinTechs source. If a borrower defaults, it'll still have to classify it as a non-performing asset or an NPA.
On Thursday, the Reserve Bank of India (RBI) published a circular on something called a First Loss Default Guarantee (FLDG). And in today’s episode for June 12th 2023, we tell you everything you need to know about it and why fintech startups are breathing a sigh of relief.