RBI P2P Guidelines Related to P2P Lending

Feb 26
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RBI rules related to P2P lending

RBI P2P Guidelines Related to P2P Lending

After more than a year full of discussions and deliberations, RBI finally released the P2P guidelines on platforms on 4th October 2017. While P2P lending is still in a nascent stage in India, it is expected that it would turn into a $4-$5 billion industry by 2023. The first P2P lending platform was established in the country in 2012. Since then there have many new entrants to the industry, and currently, there are more than 30 P2P lending platforms in the country.

As RBI has formally recognized the industry, P2P loans have turned into an ideal alternative to loans from traditional banks. Let us have a detailed look at the new rules related to P2P lending by the RBI.

Certificate of Registration

As per the directions/ P2P guidelines, no NBFC can operate a P2P lending platform without a Certificate of Registration. This applies to new as well as existing NBFCs. Also, every company aiming to register as NBFC-P2P should have net owned funds of at least Rs. 20 million or more as specified by the RBI.

Scope of Activities

Among many other things, an NBFC-P2P can-

  • Function as an intermediary through an online platform or marketplace between participants involved in P2P loans
  • Not lend money on its own
  • Not raise deposits under section 45l (bb) of the Companies Act of 2013
  • Cannot permit international funding
  • Cannot hold funds of the lenders or borrowers in their balance sheet

An NBFC-P2P is expected to-

  • Undertake loan agreements along with other loan-related documents
  • Undertake complete diligence on P2P lending participants
  • Undertake proper risk profiling and credit assessment of borrowers and inform the same to the lenders
  • Provide details of the lender to the borrower including proposed amount and interest rate but excluding the personal identity of the lender
  • Provide complete assistance for disbursement and loan repayment
  • Provide loan recovery service for loans originated on their platform

Safety Norms

The safety norms for P2P lending by RBI are as follows-

  • The total exposure of any lender to borrower/s across all the P2P platforms should not be more than Rs. 10 lakhs
  • The total exposure of a lender to a borrower across all the P2P platforms should not be more than Rs. 50,000
  • The entire loan taken by any borrower across all the P2P platforms should not be more than Rs. 10 lakhs
  • Loan maturity should not be more than 36 months

An NBFC also needs to publicly disclose-

  • Overview of score methodology/credit assessment along with the factors considered
  • Disclosure of protection/usage of data
  • Mechanism for grievance redressal
  • Performance of the portfolio along with share of NPA (Non-Performing Assets) every month
  • Business model

Mechanism for fund transfer

The fund transfer process between participants on any P2P platform should only take place through escrow accounts. All the fund transfers should strictly be through bank accounts only, and cash transactions are prohibited.

The guidelines issued by the RBI on lending and borrowing on P2P platforms is a step in the right direction as it has brought the local money lenders market to a formal platform as transactions are only allowed through banking channels. This has significantly benefited the lenders and borrowers of P2P platforms as there is now more transparency in the proceedings.

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Disclaimer: Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by Antworks P2P Financing Private Limited, and does not provide any assurance for repayment of the loans lent on it. Antworks P2P Financing Private Limited is having a valid certificate of registration dated April 01, 2019 issued by the Reserve Bank of India under Section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or the opinions expressed by the company and for repayment of deposits / discharge of liabilities by the company.

The information contained herein is only to enable the Lender to make a considered decision. Any decision taken by the Lender on the basis of this information is the sole responsibility of the Lender and Antworks P2P Financing is not liable. This information does not include any sensitive personal data or information of the Borrower. Antworks P2P Financing only facilitates a virtual meeting place between the Borrowers and the Lenders on its online platform. The decision to lend is entirely at the discretion of the Lender and Antworks P2P Financing does not guarantee that the Borrowers will receive any loans from the Lenders. Antworks P2P Financing merely aids and assist the Lenders and the Borrowers listed on its website to make and receive loans and charges a service fee from the Lenders and the Borrowers for such assistance. Antworks P2P Fianncing is only an ‘Intermediary’ under the provisions of the Information Technology Act, 1999.

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