India is the second fastest growing economic hub in the world. Millennials today, as young as 21 years are focusing on living their lives to the fullest even if their means are limited. In order to meet these needs, people are looking out for money being available at their disposal almost instantly for which they are resorting to newer avenues of finance like Peer to Peer Lending in India.
In the recent years, Peer to Peer (P2P) lending platforms also known as Non-Banking Financial Companies (NBFC-P2P as per RBI directive 2017) are setting a new trend. With the advancements in digital technology, P2P lending is made hassle free and less tedious. The main advantage of P2P borrowing is that the loan processing is done through a complete online technology-based process.
RBI’s Motive of Credit Inclusion
Even Though the industry is at a nascent stage, P2P in India has started gaining momentum. However, the 2017 RBI’s guidelines have addressed some of the key concerns of the industry and cleared many unregulated practices.
- P2P Platform will only serve as mediators for matching and originating loan deals between lenders and borrowers.
- Lenders can lend a maximum of INR 10,00,000 across P2P lending platforms
- All P2P must give top priority in ensuring confidentiality of customer data and offer complete transparency in its operations.
- Need to submit regular financial reports, loan arrangement deals, a summary of complaints filed by borrowers or lenders with RBI.
Future scope of P2P
Above mentioned RBI regulations are expected to impact the P2P lending space as follows:
- The P2P market is estimated to grow to around $4-5 billion by 2020
- A major chunk of the currently underserved market will be covered under the financial umbrella, all thanks to P2P platforms
- People that are currently opting for banks to fulfil their financial needs, would migrate to P2P lending platforms as the P2P loan application processes are very efficient. This very trend has been spotted in countries like UK and the US where P2P lending platforms have become more preferable over banks
- For the lenders on these P2P platforms, the returns are very lucrative which will continue to be the case along with more checks and processes introduced by P2P platforms in order to keep NPAs in check.
With RBI’s support, the P2P industry is ready to move to the next level of market adoption for lending money online. With all things going their side, P2P lending platforms are here to stay.