The Reserve Bank of India (RBI)’s guidelines on first loss default guarantee (FLDG), wherein the regulator has allowed a 5% default loss cover for bank-fintech deals, is overall a positive development for the fintech sector and will lead to further financial inclusion by these players, said MobiKwik’s co-founder and COO Upasana Taku.
Taku said the regulator acted proactively while introducing the guidelines and understood that there is a larger distribution of credit to new-to-credit customers and a significant level of financial inclusion is being done through fintechs. “Without the existence of any FLDG framework, it is extremely hard for them (fintechs) to get backing from large banks or NBFCs to do financial inclusion, to give credit to new-to-credit customers and smaller merchants…”
Though the FLDG guidelines will provide a greater clarity to the usage of the structure by banks and non-bank lenders, they could have adverse impacts on business volumes in segments where FLDGs are currently higher than the permissible limit of 5%, say analysts.
Ajit Velonie, senior director at CRISIL Ratings, said: “A substantial proportion of partnership, co-lending arrangements where FLDG is present, especially those with unsecured personal loan and business loan lenders, currently carry an FLDG cover of above 5%. These segments would be affected by the new guidelines.”
Business guidance
Taku said MobiKwik was able to add over 16 million new users in FY23 which increased its overall user base to 140 million customers. It was a fairly difficult year from a macro and markets perspective, she said. The last quarter of FY23 was the first profitable quarter for the fintech and it will remain profitable during FY24. After achieving one full year of profitability, the company will apply for an initial public offering.
“The overall goal that we have set is that we want to hit Rs 1,000-crore-plus revenue in FY24 and we want to generate a strong profitable year. So, we expect to be profitable during all the quarters this year, and we also want to make sure that we generate at least Rs 40-50 crore in Ebitda, if not more than that…” she said.
About 50% of MobiKwik’s revenue comes from financial products like insurance and mutual funds. During FY24, it will add more loan, card, investment and savings products, both on the consumers and merchant sides, she said.