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RBI Approves FLDG Framework, Paytm and Fintechs Might Benefit

RBI approved the FLDG framework which might benefit Paytm and other fintechs.

During the first bi-monthly monetary policy meeting for FY23-24, the Reserve Bank of India (RBI) approved the First Loss Default Guarantee (FLDG) framework subject to specific guidelines. Paytm’s operator One97 Communications gained over 5% today after the approval of the FLDG programme.

Developed by fintech and banks, an arrangement between Regulated Entities (REs) and Lending Service Providers (LSPs) or between two REs wherein one helps the other recoup losses that occur when customers default on payments is called an FLDG. 

This decision is seen as a big positive for data-tech NBFCs and fintechs. Further, the move will strengthen the digital lending ecosystem.

As per the RBI Framework, the amount of loss guarantee cover has been capped at 5% of the total loan portfolio. The DLG shall be invoked within a maximum overdue period of 120 days unless made good by the borrower before that.

At the market’s closing time, One97’s stock quoted a nine-month high of Rs 814.30 on the NSE, 5.41% higher than the previous close. The stock has been on a three-day gaining streak, up over 14%.

The company’s losses drastically reduced in the quarter ending March 2023, reaching Rs 168 crore from Rs 761 crore a year ago. Revenue from operations increased by over 52% year on year to Rs 2,335 crore.

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