FLDG guidelines: Digital lending industry seeks increase in default cover

Several players say default cover of up to 5% of loan portfolio may not be enough when compared to 100% offered by companies to banking partners earlier

The default cover for up to 5 per cent of the loan portfolio under the FLDG (first loan default guarantee) framework could be inadequate, according to a few fintech players, which otherwise welcomed the Reserve Bank of India’s (RBI’s) recent guidelines permitting the use of FLDG arrangements in digital lending.  Earlier, some entities were offering almost 100 per cent FLDG to banking partners.

“It is a good first move. But they (RBI) have still limited it (default cover) to 5 per cent, which in my view is less. I think FLDG has to be more.  I agree with them (RBI) that