While rivals retreat from default guarantees, Moneyview is doubling down

In its draft IPO prospectus, the Bengaluru-based startup revealed plans to substantially expand default loss guarantee (DLG) arrangements with lending partners as part of its credit distribution strategy. A default loss guarantee allows a partner, such as a fintech, to compensate a regulated entity, such as a bank or NBFC, for loan defaults.

The move comes even as financial institutions have been reassessing such guarantees after the Reserve Bank of India introduced guidelines in mid-2023 that capped DLG exposure at 5% of a loan portfolio and required board approval.

Paytm, a listed fintech platform that began DLG-backed loans in 2024, began retreating from the arrangement due to high costs by mid-2025. “Last year, the majority of our merchant loan distribution business was under the DLG programme…This year, the vast majority of our merchant loans are without DLG," the company said in its earnings release for Q3FY26.

In fact, India Ratings noted in an August 2025 report that while RBI's DLG framework has brought greater clarity, the rapid expansion of digital lending seen in earlier years may moderate as lenders recalibrate.

However, Moneyview's draft red herring prospectus, filed with the Securities and Exchange Board of India (Sebi) last week ahead of a planned initial public offer (IPO), tells a different story: the company has been expanding, not shrinking, its DLG exposure.

With proceeds from the public market debut, it plans to go further.

Of the fresh issue proceeds, it will deploy ₹650 crore to create additional DLG cover in the coming years, nearly half the new capital raised, with ₹450 crore earmarked to strengthen the capital base of its own NBFC, Whizdm Finance Pvt. Ltd, and the remainder for general corporate purposes.

Moneyview declined to comment on Mint’s queries.

Doubling down on DLG

This comes on the back of the company’s clear move to double down on loans backed by DLG arrangements.

Loans disbursed under DLG partnerships rose from ₹8,848 crore in FY24 to ₹11,282 crore in FY25, a 27.5% increase. In the nine months ended December 2025 alone, the company facilitated loans worth ₹9,166 crore under such arrangements, continuing at the same pace.

The number of lending partners under DLG contracts expanded from 12 in FY24–25 to 16 by December 2025 out of a total of 22, as the company brought new banks and NBFCs into arrangements.

Last month, the Reserve Bank of India (RBI) restored default-loss guarantees for non-bank lenders, reversing last year's restrictions that required lenders to exclude such guarantees from loss estimates on fintech-originated loans. This could benefit firms like Moneyview. The move suggests the regulator’s attempt to balance risk controls with the need to sustain credit flow to underserved borrowers.

For Moneyview, it is also a bet to boost its scale as it becomes a listed firm. “Scaling purely through your own balance sheet requires constant capital raising. Partnership-led lending can grow much faster,” said an industry watcher, who looks at digital lending businesses closely, but did not want to be named.

“In a partnership model where fintech provides a small first-loss guarantee, the effective leverage can be significantly higher than a balance-sheet lender would typically operate with.”

Collateral pledged to support the guarantees, typically fixed deposits or bank guarantees, have also climbed to ₹538 crore in FY25 from ₹431 crore a year ago. The contingent liability that comes with these guarantees has grown in step. DLG outstanding increased to ₹847 crore as of December 2025, up from ₹707 crore in the whole of FY25.

A play for leverage

The cost is becoming clearer in the financials. Default loss guarantee expense jumped to ₹321 crore in FY25 from ₹131 crore a year earlier, an increase of roughly 145%. The cost makes up about 15.6% of total expenses, up from about 11% in FY24. The company attributes the rise largely to higher disbursals under DLG partnerships.

Moneyview’s revenue rose sharply to ₹2,373 crore in FY25 from ₹1,342 crore in FY24, while profit increased to ₹240 crore from ₹171 crore. In the nine months ended December 2025, the company reported revenue of ₹2,339 crore and profit of ₹210 crore, tracking close to FY25 levels.

Own-book lending, where the fintech's NBFC arm funds loans directly from its balance sheet and bears full credit risk; co-lending, where the fintech’s NBFC originates alongside a bank or NBFC partner, each retaining a share of the loan; and DLG-backed partnerships, where the fintech acts as a lending service provider (LSP) and compensates its lender partners for a share of credit losses, are largely how digital lending operates.

In May, the Reserve Bank of India instructed finance companies to exclude DLGs from fintech firms when provisioning for stressed loans, further reducing their relevance.

“Fintech platforms have been applying for their own NBFC licences and entering co-lending structures, where they contribute a portion of capital and partner banks fund the larger share,” said Prashanth Ramdas, partner at Khaitan & Co. “In co-lending arrangements, people earlier tried to incorporate DLG-type commercial structures into the co-lending economics. That practice has now been restricted by the RBI after its directives in August last year.”

Overall, DLG models have been capped for most players. Fibe, Kreditbee, and Kissht, among others, have been increasing their co-lending arrangements over the past few years, effectively reducing exposure to pure DLG-backed loans.