Why NRIs are adding Peer-to-peer (P2P) Lending to their portfolio

Mar 2, 2020

For the layperson, the term NRI (Non-resident Indian) refers to any Indian who has been living abroad for a long time. But for Indian regulators and policymakers, your NRI status depends upon myriad conditions that can determine where and how to invest your hard-earned money. Even so, NRIs working abroad have historically maintained strong roots back home, investing the majority of their savings in India – whether you settle outside permanently or not. Every year, NRIs remit over $70bn to India, higher than any other country in the world. According to the World Bank, India received a whopping $79 bn in NRI remittances in 2018, registering a growth of 14% over 2017 – faster than global remittances, which grew . 9%. Promising growth prospects, flexibility, better liquidity, and better returns on investments continue to attract the NRI investor base to the country.

While India offers multiple investment options like fixed deposits, insurance, equities, property, and mutual funds, alternative investment ideas like P2P Lending have been gaining traction among those in the NRI community looking for best returns on investments. Growing by nearly 10x over the last year, Peer-to-peer( P2P) Lending is increasingly becoming a core part of the portfolio for NRI investors.

Better returns on investment from P2P Lending

Property investments have traditionally been the most popular pick for NRIs, offering gains from the rising home prices apart from a sense of emotional and financial security. However, the slump in real estate prices has dented returns, and defaults or delays by builders have eroded trust among NRIs. Falling interest rates have led to a decline in NRI bank deposits. Equities and equity mutual funds, too, have failed to generate returns on investment last year, accompanied by volatile markets.

All these factors have driven many NRIs to add alternative investment avenues, like P2P Lending, to their investment portfolios for best returns on their investments in the long term. LendenClub’s investors earned up to 17% p.a. net return on their investments last year.

Limits on traditional investment options for NRIs

According to FEMA regulations, mutual fund investments are not available for investments by NRIs from specific countries like the US and Canada. When it comes to direct equities, you can buy and sell only from an approved list of stocks, with no intra-day or short-selling allowed. For property investments, regulations allow NRIs to buy a residential house or a commercial property, but farmland purchases are restricted.

P2P Lending, in contrast, offers a better investment option where you can invest through any RBI-registered platform of your choice, and lend to any borrower of your choice, based on your risk and return criteria. In fact, through LendenClub, you can now also invest higher amounts of up to INR 50 lakhs as against earlier INR 10 lakhs as an NRI. Higher investment amounts will help you build a broader portfolio of borrowers, diversifying your risks

How to Invest in P2P Lending if you are an NRI

Investing in P2P Lending is easy, quick, and simple for NRIs. You can invest through LendenClub from your NRO bank account, or the rupee account held with any bank in India.

With LendenClub, NRIs can invest in 3 easy steps:

  • Register with your mobile number in India
  • Provide KYC documents
  • Start building your portfolio

The EMIs, which comprise both your principal lending amount and interest returns, get auto-debited to an Escrow account, to be transferred to your bank account.

While there are several investment options for NRIs, adding P2P Lending to your portfolio will help you generate better overall returns on investments, with the added benefit of diversification.

Small wonder that P2P Lending is fast becoming a preferred alternative investment option for NRIs globally.

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