Everything you should know about Peer to Peer lending

peer to peer lending growth

What is peer to peer lending?

As the name suggests, P2P lending (peer-to-peer lending) is a concept in which individuals or institutes can lend money to borrowers. The system removes the role of a financial institution as an intermediary. Instead, P2P lending platforms act as facilitators for the transaction of money. Anyone can become an investor on P2P lending platforms and effectively lend to many individuals or businesses sitting at home. This mode of lending and borrowing has increased its adoption as an alternate way of financing. Peer to Peer lending started almost a decade ago, in 2012, with very few players. The industry is expected to grow at a rate of 21.6% CAGR to reach over USD 10 Billion by 2026. The Reserve Bank of India started to regulate this industry in India in 2017. The master guidelines from RBI came into effect on 4th October 2017. Oversight from the country’s highest regulatory body has brought recognition and interest in the industry.

How does P2P lending work?

P2P lending websites source borrowers and investors on the platform. Both these parties are then directly connected. Each platform may have its own set of rates and terms, which both the investor and borrower needs to accept before making any transaction.
how peer to peer lending works

Illustration of a borrower and lender in the P2P lending platform

Firstly, a borrower can request a loan on the platform. The platform is responsible for completing the KYC of the borrower. They are also expected to complete credit underwriting using various data points collected from the borrower. Once the due diligence is done, the borrower can accept the offered terms and accept. Once accepted the transaction is completed between both parties, which can be completely automated or manual. Platforms can decide the type of loans they want to offer, such as personal loans, business loans, invoice discounting, medical loans etc.

History of Peer to Peer lending in India

Peer to peer (P2P) lending in India is a relatively new concept, with the first P2P lending platform launching in 2012. However, it has seen rapid growth in recent years as more and more individuals have turned to P2P platforms as an alternative to traditional lending institutions. The Reserve Bank of India (RBI) issued guidelines for P2P lending platforms in 2017 and the sector got the legal recognition in 2018. The RBI has set up a regulatory framework for P2P lending platforms, including registration and compliance requirements and risk management and data protection guidelines. The P2P lending platforms in India are typically focused on providing small loans to individuals and small businesses, and they have been credited with helping to increase financial inclusion in the country. However, the industry has also faced challenges, such as concerns about fraud and defaults. Despite this, P2P lending in India continues to grow rapidly and is expected to become a significant source of alternative financing in the future.


P2P lending has both pros and cons. As an individual, you need to identify these and decide if this is the right instrument to fulfill your financial needs. Where investors can earn high returns, borrowers can get speedy loans. Do remember that P2P investments are subject to default risk. So before investing, ensure that you have researched and reviewed the platform’s performance.

LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping lenders diversify their investments beyond traditional investment instruments ever since.



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The Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by Innofin Solutions Private Limited, and does not provide any assurance for repayment of the loans lent through its platform.

LenDenClub is an Intermediary under the provisions of the Information Technology Act, 2000 and virtually connects lenders and borrowers through its electronic platform via the website and/or mobile app.

The lending transaction is purely between lenders and borrowers at their own discretion, and LenDenClub does not assure loan fulfilment and/or lending simple interest. Also, the information provided on the platform is verified or checked on the best efforts basis without guaranteeing any accuracy of the data/information verification. Any lending decision taken by a lender on the basis of this information is at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower, fully or partially. The risk is entirely on the lender. LenDenClub will not be responsible for the full or partial loss of the principal and/or interest of lenders’ lending amounts.

*This is an annualized yield and is subject to the maximum FMPP tenure, which is 5 years. P2P lending is subject to high risk and may cause an entire loss of principal.

*P2P lending is subject to risks. And lending decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

** Average value mentioned is the weighted average of simple interest received by lenders

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