In this article, we will explore the recent developments in the Indian lending landscape, particularly the First Loss Default Guarantee (FLDG) guidelines issued by the Reserve Bank of India (RBI). We will delve into the need for cash deposits, fixed deposits, and bank guarantees by fintechs to provide guarantees to banks, and highlight how the Union Budget’s provision allowing the replacement of bank guarantees with insurance surety bonds opens up exciting prospects for startups. Join us as we unravel the significance of these changes and shed light on the growing importance of insurance surety bonds in mitigating risks.

Understanding the FLDG Guidelines and the role of Insurance Surety Bonds

A Game-Changer for the Lending Ecosystem, The RBI’s FLDG guidelines have ushered in a new era of clarity and innovation in the digital lending domain. These guidelines enable fintechs to guarantee a portion of loan defaults for banks and non-banking financial companies (NBFCs). Previously, fintechs offered nearly 100% guarantees, posing risks for lenders. The FLDG guidelines now limit the guarantee to a maximum of 5% of the loan portfolio, mitigating the exposure to potential defaults.

Need of Financial Guarantees

The Need for Cash Deposits, Fixed Deposits, and Bank Guarantees To comply with the FLDG guidelines, fintechs are required to provide guarantees to lenders in the form of cash deposits, fixed deposits, or bank guarantees. This ensures that in the event of loan defaults, the fintechs have the financial resources to compensate the lenders. While these methods offer a sense of security, they come with their own limitations, such as tying up capital in cash or fixed deposits and the cumbersome process of obtaining bank guarantees.

The Union Budget 2022 Provisions: Insurance Surety Bonds as replacement to BGs required under FLDG Guidelines

A Paradigm Shift towards Insurance Surety Bonds The Union Budget of 2022 brought a significant change by allowing the replacement of bank guarantees with insurance surety bonds. This development opens up a world of opportunities for fintech to work with suretytech (insurtech) companies. Insurance surety bonds offer several advantages over traditional bank guarantees, making them an attractive alternative for providing financial guarantees.

The Rise of Insurance Surety Bonds under FLDG Guidelines: Surety Seven (007) Empowering Fintechs

Unlocking Collateral-Free Guarantees

Insurance surety bonds from Suretytech (insurtech) companies, like Surety Seven (007), eliminate the need for collateral, enabling fintechs to unlock their capital and invest it in their growth and expansion. This newfound liquidity can drive innovation, create more opportunities, and propel the digital lending ecosystem forward.

Unblocking Lines of Credit

When startups opt for insurance surety bonds, they can unblock lines of credit provided by banks. This allows them to access additional working capital and strengthens their financial position, fostering their ability to scale and take on new lending partnerships.

Streamlining the Process

Obtaining insurance surety bonds offers a quick and hassle-free experience. Startups can save valuable time and resources by leveraging digital solutions that streamline the issuance and management of surety bonds, ensuring a seamless journey.

The Importance of Insurance Surety Bonds for Startups

Startups, fintechs, often face challenges in meeting the stringent requirements of traditional bank guarantees, which may hinder their growth potential. Insurance surety bonds provide a viable solution by offering a flexible and accessible option for startups to secure their financial obligations. By replacing bank guarantees with insurance surety bonds, startups can foster trust, enhance their credibility, and forge stronger partnerships with banks and NBFCs.


The FLDG guidelines introduced by the RBI have reshaped the lending landscape, providing clarity and fostering innovation. The Union Budget 2022’s provisions allowing the use of insurance surety bonds as a replacement for bank guarantees have further propelled this transformation. For fintechs and startups, embracing insurance surety bonds opens up new possibilities, eliminating collateral requirements, unblocking lines of credit, and simplifying the guarantee process. Surety Seven (007) is at the forefront of this evolution, providing digital solutions that empower startups and fintechs to navigate the changing landscape with ease. As the demand for insurance surety bonds grows, we are committed to providing a seamless and efficient experience, driving the digital ecosystem towards a more robust and secure future.

Are you ready to embark on this transformative journey? Discover the power of insurance surety bonds with Surety Seven (007) today!

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