Is P2P Lending In India Safe?

is p2p lending safe

P2P lending operates on digital platforms that match borrowers seeking funds with individual lenders willing to lend money. There is no intermediary involved, thereby facilitating direct transactions between peers. Globally, the P2P market is projected to reach $705.81 billion by 2030. The Indian P2P market is expected to grow to $10.5 billion by 2026

The major attraction for P2P lending is that lenders earn higher rates of return as compared to interest earned on savings accounts, certificates of deposits, etc. But P2P lending also has certain risks.

So, is P2P lending safe?

Let’s understand in more details.

Understanding P2P Lending

Peer-to-peer lending is a method of debt financing. It enables individuals to borrow and lend money directly to one another through online platforms. Hence, unlike traditional methods, no financial intermediaries are involved.

Through online marketplaces, borrowers are matched with individual lenders who provide funds for loans.

12% Return

Risks Associated with P2P Lending

To answer the question “Is P2P lending safe?”, let us understand the common risks that are said to be associated with P2P lending:

1. Credit Default

As in any other lending P2P lending carries the risk of borrowers not repaying their loans. This can lead to financial losses for lenders.

2. Regulatory Oversight

The regulations overseeing P2P lending vary across regions. This has an impact on the safety of lending transactions. 

3. Liquidity Risks

Unlike traditional banks, P2P lending platforms often lack secondary markets for loan trading. This means lenders may face difficulties accessing their funds if they need to withdraw them early or if there’s a sudden increase in borrower defaults.

Insights into Indian P2P Industry Regulations

Now, let us assess the Indian P2P industry on the above parameters to get a better idea of whether P2P lending is safe in India or not:

1. Regulatory Oversight

To prevent any moral hazard, the Reserve Bank of India was proactive in laying down a regulatory framework when the P2P sector was still in the nascent stages in the year 2017. At that time the sector stood at just Rs 100 crore in assets. Now it stands at Rs 7,000 crore in assets.

The Reserve Bank of India requires that such lending should be done through an approved NBFC-P2P platform. RBI approves only those entities to provide P2P services that it deems fit. Moreover, lenders can lend at most Rs 50 lakhs on these platforms.

Hence, the P2P industry in India is well-regulated with strict provisions such as:

  • Caps on lending and borrowing limits to control exposure risks
  • Use of escrow accounts to separate lender funds from platform finances for security
  • Strict technological and operational standards
  • Wholesale lending is not allowed
  • Management of escrow accounts by bank-managed trustees etc

2. Diversification of Risks

The risk of defaults is always there in lending, so no P2P platform can guarantee returns. However, P2P platforms can help in reducing and managing risk by facilitating diversified portfolios through fractional lending, where investment from multiple investors is pooled for a single loan.

The technology ensures that this fractionalisation is both effective and cost-efficient. Moreover, an investor can lend to multiple borrowers.

It is important to keep in mind that the returns that P2P lending platforms state are the maximum returns and there is no such assurance for the same.

3. Limited Exposure Risk

As per the RBI, the minimum amount that can be lent is Rs 500-750. A maximum amount of Rs 50 lakhs is capped per lender (in the aggregate) across all P2P platforms.

If a lender is lending more than Rs 10,00,000, they will have to get a certificate from a practising Chartered Accountant who should certify their net worth to be at least Rs 50,00,000.

However, a lender can only lend Rs 50,000 to a borrower in case of one-on-one lending. Hence, the RBI has put in place enough restrictions to ensure that P2P lending is a safe activity.

4. Advanced Technology for Risk Management

Leading P2P players in India like LenDenClub leverage advanced and robust technology or risk management. They ensure that borrowers are credibly verified.

These platforms ensure that lenders thoroughly understand the borrower’s risk profile. They facilitate lenders in choosing the borrowers they want to lend to and facilitate seamless loan distribution to them.

Why Engage in P2P Lending Through LenDenClub?

Here are a few provisions by LenDen Club that make it a reliable platform for P2P lending:

1. Rigorous Credit Evaluation

LenDenClub employs a comprehensive credit evaluation process that involves assessing borrowers through underwriting, KYC process, and information checks.

2. Regulatory Compliance

LenDenClub strictly operates in compliance with the guidelines of the RBI.

3. Diversified Investment Options

LenDenClub offers lenders the opportunity to diversify their investments across a wide range of borrower profiles. This helps in reducing the risk of defaults thereby increasing potential returns.

4. Measures to Reduce Risk

To minimize collection risk, the platform engages in a variety of recovery efforts in line with RBI guidelines, including digital outreach and, if necessary, legal action.

Since investments are spread across many loans, any single default has a minimal impact on overall returns.

5. Transparent Operations

LenDenClub is very transparent in its operations. It gives lenders and borrowers detailed information regarding fees, loan terms, fees, etc.


P2P lending has the same risks inherent in lending i.e. risk of credit default. The RBI has been proactive in putting in place robust regulatory guidelines.

Leading P2P lending platforms like LenDenClub ensure rigorous credit evaluation of borrowers and have a robust technological infrastructure in place to ensure a secure experience for their customers.

Nonetheless, there are some risks inherent in P2P lending and investors are advised to do their due diligence and have risk management strategies in place.


1. Is peer-to-peer lending safe in India?

The RBI has put in place strong regulatory guidelines to minimise any risks associated with such activities. But the inherent risks to lending remain and lenders are advised to do their due diligence while investing using any platform.

2. Does P2P lending generate high profits?

Yes, P2P lending does generate higher returns as compared to investing in savings accounts or certificates of deposit. But you must do your due diligence before lending funds through P2P.

3. What is the maximum limit for peer-to-peer(P2P) lending in India?

An individual cannot lend more than Rs 50,00,000 through P2P lending in India.

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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