HomeMedia CenterMy Iris: RBI to treat P2P lending platforms as NBFCs

My Iris: RBI to treat P2P lending platforms as NBFCs

The Reserve Bank of India (RBI) has notified that peer-to-peer (P2P) lending platforms would be treated as non-banking financial companies (NBFCs).

As per RBI, P2P lending is a form of crowd-funding used to raise loans which are paid back with interest. It can be defined as the use of an online platform that matches lenders with borrowers in order to provide unsecured loans. The borrower can either be an individual or a legal person requiring a loan.

The RBI in a gazette notification to the government said, ”The Reserve Bank of India, on being satisfied that it is necessary to do so, in exercise of the powers conferred on it by… the Reserve Bank of India Act 1934, (2 of 1934) with prior approval from the government, hereby specifies, a non-banking institution that carries on the business of a peer to peer lending platform to be a non-banking financial company.”

”P2P lending promotes alternative forms of finance, where formal finance is unable to reach and also has the potential to soften the lending rates as a result of lower operational costs and enhanced competition with the traditional lending channels. If properly regulated, the P2P lending platforms can do this more effectively,” it added.

Bhavin Patel, co-Founder & chief executive officer, LenDenClub said, “This RBI notification is a welcome move and will have a positive impact on the entire sector. This is the first step towards regulatory regime for peer to peer lending sector.”

He further stated, ”In our view, this RBI regulation will bring a much needed legal clarity in the system, and lenders/platform will get legal rights to take adequate steps against defaulters. Also, regulation will mean wide acceptability of this concept among lenders as well as borrowers. This will fulfill RBI’s expectation of taking P2P Lending to the masses of this country.”

The RBI had floated a consultation paper in April 2016 on peer to peer (P2P) lending platforms. P2P lending has gathered momentum globally and is taking root in India.

Credit: My Iris

LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping investors 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 investment returns. 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 investment 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’ investment amounts.

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

*P2P investment is subject to risks. And investment 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 returns received by investors

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