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Peer to Peer Lending Regulations in India

Peer to peer lending in India is an online crowd funding model where people who want to invest their money meet with people who want to borrow it. The people who have saved their money can get higher interest rates by lending their money instead of just saving and the borrowers can get personal loans which are on comparatively lower rates of interest.
On October 4, 2017, the Reserve Bank of India had issued directions for the non-banking financial companies (NBFCs) which operate the peer to peer lending platforms. It has been stated according to the directions that no NBFC can start the business or continue their business on the p2p lending platform without receiving a certificate of registration.
The company who is seeking registration with the bank as the NBFC-P2P should have net owned funds of not less than Rs. 20 million or any such higher amount which the bank may specify. The existing NBFC-P2P’s have been asked to apply for the registration within 3 months from the date of notification.
These directions stated by the RBI, known as the Non-Banking Financial Company-Peer to Peer Lending Platform (Reserve Bank) Directions in 2017, have been come into effect immediately.
The activities of NBFC-P2P companies
Among many other things, the NBFC-P2P can:
- Perform as an intermediary by providing an online market place or a platform to those who are involved in P2P lending
The NBFC-P2P cannot:
- Raise deposits which are defined by or under the section 45(bb) of the Act or the Companies Act, 2013
- Lend on its own
- Hold on its own a balance sheet of the funds which is received from the lenders for lending or of funds received from the borrowers for servicing the loans or of such funds
- Permit the international flow of funds
Further, the NBFC-P2P will be expected to:
- Conduct due diligence on the participants
- Take the credit assessment and the risk profiling of the borrowers and also showcase the same to the prospective lenders
- Take the documentation of the loan agreement and also other related documents
- Provide ample assistance in the disbursement and also on the repayment of the loan amount
- Render the services for the recovery of loans which is originated on the platform
Thus, above are some of the many guidelines that peer to peer lending platforms must observe, as laid out by the RBI.

About Author Mihir Thapar :

Mihir is professional blogger who love to write about Peer to Peer lending and other investment opportunities.

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Article Added on Thursday, December 27, 2018
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