Economic Times: RBI notifies P2P lending platforms as NBFCs: Agencies

By: Admin

NEW DELHI: The Reserve Bank of India on Wednesday notified that peer-to-peer (P2P) lending platforms would be treated as non-banking financial companies (NBFCs), an agency reported. This suggests the lending interface will now come under the purview of RBIs regulation under the RBI Act.

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 interest rate may be set by the platform or mutual agreement between the borrower and the lender.

Fees are paid to the platform by both the lender as well as the borrower. Borrowers pay an origination fee — either a flat rate fee or as a percentage of the loan amount raised — according to their risk category.

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.

Although nascent in India and not significant in value yet, potential benefits that P2P lending promises to various stakeholders (to borrowers, lenders and agencies) and its associated risks to the financial system are too important to be ignored, the consultation paper said.

Credit: Economic Times

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