Q. The “First Loss Default Guarantee (FLDG)” is often seen in news related to?
Red Book
Red Book

[A] Agriculture

[B] Industry

[C] Fintech companies

[D] International funding

Answer: C
Notes:

Explanation: The Reserve Bank of India (RBI) has allowed First Loss Default Guarantee (FLDG) for fintech Lending Service Providers (LSP).

  • The first loss default guarantee (FLDG) is a lending model between banks or non-banking finance companies (Regulated Entities) and lending service providers (fintech firms).
  • In FLDG arrangement, the initial hit on a default is taken by a third party such as fintech firm that originated the loan.
  • The fintech player (LSP) compensates lenders if the borrower defaults up to a certain threshold of the loan portfolio.

Source: FORUMIAS

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