FLDG or ‘first loan default guarantee’ is an arrangement between a fintech company and regulated entity (RE), including banks and non-banking finance companies, wherein the fintech compensates the RE to a certain extent if the borrower defaults. With the implementation of RBI’s first set of digital lending guidelines, the FLDG model is not expected to survive long in India, industry participants say, as lending is now expected to occur directly between borrowers’ and REs’ account and not on, or through any third-party loan service providers’ book. Bankers are now entering co-lending, co-branded card partnerships with NBFCs and using fintechs’ technical capabilities to upgrade their services.
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