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Blog / RBI's Consultation Paper on Peer to Peer Lending.
10 May
RBI on P2P Lending

RBI's Consultation Paper on Peer to Peer Lending.

Good News for P2P (Peer-to-Peer) lending industry in India..!!!

The much awaited consultation paper from RBI on P2P lending has been released recently and will play an instrumental role in deciding the contours of P2P (Peer to Peer) lending in India. It looks like a sector and lender confidence boosting step by RBI.

In our endeavour to promote adequate transparency in P2P Lending space, we are pleased to share some of the key highlights of this consultation paper: -

  • The platforms will be allowed to opine on the suitability of a lender and creditworthiness of a borrower.
  • The P2P platform at present could be registered only as an intermediary, which means the role of the platform would be confined to bringing the borrower and lender together without the lending and borrowing getting reflected on its balance sheet.
  • It will also be mandated that funds will have to necessarily move directly from the lender's bank account to the borrower's bank account to obviate the threat of money laundering.
  • The P2P platforms will be prohibited from giving any assured return either directly or indirectly.
  • Prohibit the platform being used for any cross-border transaction in view of FEMA provisions relating to transactions between residents and non-residents.
  • P2P lending companies will have to establish a brick and mortar place of business in India. The management and operational personnel of the platform would also need to be stationed within India.
  • The platforms will also need to have a Business Continuity Plan (BCP) with adequate risk management systems for its smooth operations.
  • BCP (Business Continuity Plan) and back up for the data needs to be put in place since the platform would also act as a custodian of the agreements/cheques etc. In case of failure of the platform to continue its operations, it should have a 'living will' or alternative arrangement in the form of an agreement for continuation of its operations.

To read the complete consultation paper, please click on below link: - https://rbidocs.rbi.org.in/rdocs/content/pdfs/CPERR280416.pdf

We at Lendenclub are actively collating feedback from lenders and will share it with regulators to draft a progressive and beneficial regulations.