RBI Regulations on P2P Lending Platforms in India
If you are new to Peer to Peer Lending in India, you must get an idea about RBI’s regulation for P2P Lending Platforms before you start investing in these online platforms. The below is a summary of RBI Regulations you should know:
Scope of Activity of P2P Platform:
- Act as a technology platform to arrange a transaction between lenders & borrowers
- P2P Platform cannot raise deposits defined under Companies Act 1956 (2013)
- The platform cannot lend money to borrowers directly nor hold funds provided by the lenders.
- International funds are not allowed
Expectations from NBFC – P2P:
- Due diligence of the participants (Lenders & borrowers)
- Undertake risk assessment & credit profiling of the borrowers so that lenders can make informed decision
- Undertake completion/signing of loan agreement & other required documents by participants
- Arrange disbursement of the loans and repayment of EMIs
- Provide services related to collection of the EMIs
Prudential norms for NBFC – P2P:
- Aggregate exposure of a lender to all borrowers at any point of time, across all P2Ps, shall be capped at Rs.10,00,000/-.
- Aggregate loans taken by a borrower at any point of time, across all P2Ps, shall be capped at Rs.10,00,000/-.
- Exposure of a single lender to the same borrower, across all P2Ps, shall not exceed ₹ 50,000/-
- Maturity of the loans shall not exceed 36 months.
- NBFC-P2Ps shall obtain a certificate from the borrower or lender, as applicable, that the limits prescribed above are being adhered to.
Fund Transfer Mechanism:
Fund transfer between the participants on the Peer to Peer Lending Platform shall be through escrow account mechanisms which will be operated by a trustee. At least two escrow accounts, one for funds received from lenders and pending disbursal, and the other for collections from borrowers, shall be maintained.
- Lender should be informed about details about the borrower/s including personal identity, required amount, interest rate sought and credit score as arrived by the NBFC-P2P.
- Lender should be informed about details regarding all the terms and conditions of the loan, including likely return, fees and taxes;
- Borrower should be informed about details regarding details of lender/s including proposed amount, interest rate offered but excluding personal identity and contact details;
- All Interest Rates should be mentioned in Annualized Percentage Rate (APR) format.