Archive · 27 May 2025
RBI's Fintech Rule Changes Impact NBFC Loan Practices
The Reserve Bank of India (RBI), the central bank of India, has changed the rules for how financial companies (NBFCs) handle loans they get from fintech companies.
Previously, if a fintech company promised to cover loan losses (DLG), NBFCs didn't need to set aside as much money.
Now, NBFCs must set aside the full amount, regardless of the DLG.
This means fintechs may generate fewer loans and earn less from fees.
The goal is to ensure banks are careful when issuing loans.
RBI directed NBFCs to exclude default loss guarantees (DLGs) from fintech firms when making loan provisions.
NBFCs must make full provisions for loans from fintech platforms.
The changes impact origination volumes, fee income, and therefore earnings for fintech companies.
DLGs, often in the form of fixed deposits, were previously factored in by NBFCs.
The RBI aims to strengthen NBFCs' underwriting skills.
- Who
- Reserve Bank of India (RBI) and non-banking finance companies (NBFCs)
- What
- RBI mandated that NBFCs exclude DLGs from fintech firms when computing expected credit losses.
- When
- Provisions have to be implemented by September 30, 2025, with some NBFCs starting in Q4 FY25.
- Where
- India
- Why
- To avoid contingent risks in the financial system and strengthen underwriting skills.
Fintech's Perspective
NBFCs' Perspective
Impact on Business Generation
Fintech's Perspective
Fintechs will see impacts to origination volumes, earnings, and fee income.
NBFCs' Perspective
NBFCs will have to make full provisions for loans, reducing their attractiveness for new business.
- RBI Directive Implementation Date
- September 30, 2025
- DLG Cap
- 5%
- Affected Entities
- NBFCs
- DLG Form
- Fixed Deposits
