The RBI has come out with a well-designed regulatory regime of Peer to Peer lending operators. These entities will be now treated as Non-Banking Finance Companies. Detailed regulations including registration procedures, fund requirements etc. were brought out by the RBI.
What is Peer to Peer Lending?
According to the RBI guidelines, ‘Peer to Peer Lending Platform means an intermediary providing the services of loan facilitation via online medium or otherwise, to the participants.’ Participants are persons who has entered into an arrangement with an NBFCP2P to lend on it or to avail of loan facilitation services provided by it.
What is NBFC-P2P?
Non-banking financial company – Peer to Peer Lending Platform (NBFC-P2P) means a non-banking institution which carries on the business of a Peer to Peer Lending Platform.
Eligibility and Registration for P2P
Only entities registered as a company can get P2P registration from the RBI.
Every NBFC-P2P shall obtain a certificate of registration to start P2P lending activities before starting operations.
Every company seeking registration with the RBI as an NBFC-P2P shall have a net owned fund of not less than rupees twenty million (Rs 2 crores) or such higher amount as the RBI may specify.
After receiving applications, RBI may check and grant NBFC status for providing P2P lending.
Activities of P2P
The RBI has defined P2P as an online platform that matches lenders with borrowers in order to provide unsecured loans. The P2P:
should act as an intermediary providing an online marketplace or platform to the participants involved in Peer to Peer lending;
should not mobilise deposits or give loan on its own.
should not provide or arrange any credit enhancement or credit guarantee;
should not facilitate or permit any secured lending linked to its platform; i.e. only clean loans will be permitted;
should not hold, on its own balance sheet, funds received from lenders for lending, or funds received from borrowers for servicing loans and the specified funds.
Should not permit international flow of funds;
Should store and process all data relating to its activities and participants on hardware located within India.
Prudential norms for P2P
NBFC-P2P shall maintain a Leverage Ratio not exceeding 2.
Lending limit: The aggregate exposure of a lender to all borrowers at any point of time, across all P2Ps, shall be subject to a cap of Rs 10,00,000/-.
Borrowing limit: The aggregate loans taken by a borrower at any point of time, across all P2Ps, shall be subject to a cap of Rs 10,00,000/.
The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000/-.
The maturity of the loans shall not exceed 36 months.
The loan recovery practices of other NBFCs will be applicable to P2Ps. There should be proper redressal mechanisms for complaints. Fund should be transferred directly from the lender’s bank account to that of the borrower. This is needed to check money laundering