First Loss Default Guarantee: Settling the Disquiet in the Fintech Sector

The Reserve Bank of India (“RBI”) issued Guidelines on Default Loss Guarantee in Digital Lending on 8th June 2023, to give a green signal to Default Loss Guarantee or First Loss Default Guarantee (“FLDG”) arrangements between Banks or Non-Banking Financial Companies (“Regulated Entities” or “RE”) and Lending Service Providers (“LSPs”) (typically a Fintech entity). This was a progressive step towards the Fintech sector and guarding the interests of the stakeholders involved in the transaction....