'Peer-to-peer lending platforms are NBFCs'

Cornelia Mascio
Settembre 21, 2017

While the impending regulations governing Peer-to-Peer (P2P) lending platforms are awaited, the Reserve Bank of India (RBI) has notified that such platforms will fall under the ambit of a Non-Banking Financial Company (NBFC).

The term "the business of a peer to peer lending platform" shall mean the business of providing under a contract, the service of loan facilitation, via online medium or otherwise, to the participants who have entered into an arrangement with that platform to lend on it or to avail of loan facilitation services provided by it. Borrowers pay an origination fee, either a flat rate fee or as a percentage of the loan amount raised- according to their risk category.

"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".

After more than a year of haze around regulations for the peer-to-peer lending startups, a notification from the government has emerged as a green shoot for the fledgling lending industry.

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". Fees are paid to the platform by both the lender as well as the borrower. "This will fulfill RBI's expectation of taking P2P Lending to the masses of this country".

This comes nearly 16 months after the central bank had issued a consultation paper on the same in April 2016. P2P lending has gathered momentum globally and is taking root in India.

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