Peer-to-Peer or P2P lending is a form of platform, which enables businesses or individuals to lend and borrow money noted Bahaa Abdul Hussein. However, there is no dependence on a traditional financial organization to control monetary transactions. The platform is also referred to as social lending or crowdlending as the system directly connects lenders and borrowers through an app or a website. Thus, it is a mechanism that connects people who require credit and others ready to lend.

Peer-to-Peer Lending Regulations

Registration requirements

All prospective and existing P2P in India have to make applications for NBFC P2P lending registrations to the Reserve Bank of India. The RBI circulates guidelines periodically for regulating these lending platforms ensuring that these grow in a regulated, fair and structured manner.

Such guidelines are applicable to all organizations opting for P2P lending registration. These guidelines are released to secure the transactions of the lenders and lending platforms.

Registration Process

  • The first step in registering a P2P with the Reserve Bank of India is to fill up the application form. It is available on the website of the bank.
  • Once the form has been filled up, the business that wants to procure NBFC-Peer to Peer Registration has to submit it along with all necessary documents.
  • The Reserve Bank of India checks all registration conditions that the applicant submits. These include the applicant’s entrepreneurial, managerial, and technological capabilities to commence the operation of Peer-to-Peer Lending Platform.
  • The Reserve Bank of India approves in-principle after satisfactory verification of required plan and conditions of business.
  • The RBI’s in-principle nod of the P2P registration is valid for 12 months to set up the P2P Lending Platform. The validity period is also applicable for putting all necessary technologies in place to begin the business of the Peer-to-Peer platform.

Other regulatory requirements

  • The Peer-to-Peer platform should maintain a Leverage Ratio (Net owned fund/Outside Liabilities) that should not go beyond two crores.
  • A lender who invests over INR 10 lac across all platform has to produce a Net worth certification to Peer-to-Peer platform from a Chartered Accountant. The accountant has to certify the lender’s minimum Net worth.
  • A lender can lend up to INR 50 lac to its borrowers across all the platforms.
  • When there is a single borrower and a single lender, the former cannot lend more than INR 50,000 across all the platforms. Additionally, the loan maturity period associated with the platform should not be more than 36 months.
  • A borrower cannot borrow for more than INR 10 lac across all platforms at any time.

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