The Landscape of P2P Lending in India 

Aug 5, 2022

The Landscape of P2P Lending in India

India, one of the economies with the high growth rates, is quickly becoming one of the world’s thriving fintech hubs. Today a large number of Indians, especially millennials, have adopted the idea of digital payments, mobile banking, and digital financing.

Many elements, including an expanded digital infrastructure, availability of internet, and affordable smartphones, are laying the groundwork for a paradigm shift in the established banking system. As a result, the financial services sector is made capable of offering a wider range of products and services that could not be thought of earlier. For instance, the UPI or digital wallets interface has made it possible for people to transfer money anywhere in just a matter of seconds!

The Indian digital investment sector with a size of USD 6.4 bn in 2021 is to grow at a CAGR of 22.4%, setting the target of USD 14.3 bn by 2025. Different solutions that fintech companies have created are today branching out as alternatives to the traditional banking methods. As a result, there are quite a few new-age investment products that have surfaced in the markets in the past few years.

The peer-to-peer, or P2P lending segment, is one such new-age investment product. It enables investors to lend money meaningfully to individuals through online channels with relatively high rates of returns.h

According to a report, the P2P lending market in India, which is still in its infancy, is to hit $10 billion by 2025.

What is P2P lending?

Giving something temporarily in exchange for its return or its equal is lend money meaning. p2p lending in india services connect lenders and borrowers in a marketplace paradigm. Here, lenders can disburse funds after reviewing borrower profiles in the online environment. It offers both borrowers and lenders a simple answer.

Anyone can lend money through P2P channels and earn a competitive return, while those in need can borrow money for short-term needs.

Are P2P platforms regulated?

To safeguard the interests of borrowers and lenders, the Reserve Bank of India regulated P2P lending platforms in October 2017 by requiring P2P businesses to apply for a license.

As a result, it has become mandatory for such P2P lending platforms to get an NBFC-P2P license before they can begin their operations. For instance, LenDenClub commenced its operations as a licensed NBFC-P2P entity in 2014. The RBI’s policies ensured that there were guidelines for borrowing and lending in the P2P environment.

P2P lending platforms have a greater chance of closing the credit gap in the nation because they operate in a regulated environment. Besides, the regulatory actions have increased lenders’ and borrowers’ trust in the developing lending ecosystem.

How do P2P enable a structured lending ecosystem?

P2P lending has made lending more democratic throughout the nation. But, due to many financial catastrophes, India’s credit economy has remained unbalanced throughout the last few years. As a result, even the lending industry has been hit.

The aftermath of Covid-19 has created fresh investment opportunities for people desiring to invest their surplus funds. With the widening credit-gap, the demand for money is ever-growing, and that’s where the P2P lending ecosystem kicks in to generate returns.

P2P lending services offer credit to anyone with a good credit score. P2P platforms close the gap and create a favorable ecology for lending and borrowing.

Significant Aspect of P2P lenders

Here are a few key reasons why P2P lending will soon overtake traditional lending in the financial industry. These are listed below:-

Interest Rate

Interest rate is the most crucial factor for peer-to-peer lenders. The P2P network can enable the investor to earn a good annual interest rate. LenDenClub has a 5-Year history of generating and consistent returns. Investors have generated returns of up to 10-12%* per annum under its platform. Many people are forced to look for a workable substitute to get a better return on their money because traditional savings accounts don’t offer the best interest rate, including P2P investing.

Ease of Use

Comparing P2P platforms to other investing alternatives like shares and equities, we can see that they are more user-friendly. P2P investing is conducted on web or app platforms with less technical jargon. Anyone, even those without much financial knowledge, can get started using a P2P platform. With LenDenClub, you can start safe very small amount and increase your exposure over time. The entire process is digital and AI-based, and very little human intervention is required.

Variety

With a variety of borrowers looking to borrow funds for different purposes, investors are able to diversify their risk. They do so by creating smaller baskets of investments. This is termed as pooled-borrowings. A number of investors invest small amounts to fund the requirements of a single borrower. So while you’re able to finance multiple borrowers at the same time, the concept mitigates the risk of default, creating a win-win situation for both the parties.

Diversification through Automation

Most P2P lending hubs offer a solution that allows you to diversify your investment across several lucrative prospects. LenDenClub’s AI-based lending automates this process for you. The company believes in protecting the interests of its investors. And for that to happen, diversification is the key. So when you invest your money through LenDenClub’s marketplace, diversification is not optional. It’s a must- embedded in the lending process!

Compounding

Investing is not a one-time cycle! You invest, and then you reinvest to ensure that compounding works in your favor. So while you enjoy monthly payments in the form of EMIs, let your money work for you by deciding to reinvest. Of course, it’s not compulsory. But when you get good returns just by a few clicks on a website, it’s something worthwhile to explore!

Future of P2P lending

The landscape of Indian fintech has changed as a result of P2P lending. A mobile phone app now makes credit accessible to every creditworthy individual.

The lending ecosystem has expanded its horizons of credit acceptance. It allows investors to switch to an alternative asset class. This idea is proving to be among the most inventive upheavals in the fintech industry. So when the economics of finance are changing, why not be an early part of the revolution?

Join LenDenClub today and let your money work for you through our platform firsthand!

  • A family of more than 2 million people
  • AI-powered Auto investment
  • Allows diversification and reduces risk
  • Screens borrower’s profile through 200+ data points to reduce the risk of default.
  • Provides returns up to 12% p.a*.
  • Market-risk free returns

Hop on the bandwagon with 2 million+ investors. Register now!

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