Tough journey ahead for online lenders

The regulators were hiding behind the curtain to see how far the new generation kid – digital bankers (k known in different names like peer to peer lenders) will go. At last the US Treasury has brought a report pointing suspicion about the stability of the financial tech bankers or peer to peer lenders.

The online lenders were emerging as another wave of digital disruptors. Central bankers watched them without brining any blockade at the infancy stage. At the same time, most of the central bankers are not believers of online lending; they can be so especially after the bitter experiences of the global financial crisis.

Genesis and growth of new financial services and practices occurs in the West; precisely in the US. Generally, any such venture initiative gets applause from the US regulators, but only before 2007.

The US Treasury was in some sort of a historical mission to develop an approach towards online lending. nobody the regulation industry is ready to take the blame for suffocating a newborn industry. Understandably, the treasury waited and like in the case of every emerging sector, some problem arose in the online lending industry as well.

The alleged mis- selling of loans by the US peer to peer lending frim Lending Club provided the treasury an opportunity to publish a prepared text that casts doubt about the stability of the platform.

After lauding the innovative efforts of online lenders, the treasury added that many of the new platforms in the US, around 400, had no experience of operating “through a complete credit cycle”.

 The online lending industry is just growing in most countries including in some big developing countries like China and India. but how the sector is to be regulated before any major setback appears is not answered by many central banks.

In India, the RBI has issued a discussion paper about peer to peer lending. so far, it has given definitions and other academic base works. But in future, with other central banks developing concrete idea about regulation and facilitation, the RBI may put a strong regulatory regime for the new kids in the financial tech industry.