RBI to head the P2P lending firms in India

Top Quote Presently all the Peer-to-peer loaning platforms in India will be under the control and directions of Reserve Bank of India, a newspaper notice from the Indian government expressed this on Wednesday. The warning adequately affirmed that all the enlisted Peer-to-peer platforms will be presently perceived under the working of RBI. End Quote
  • (1888PressRelease) November 10, 2017 - Now all the Peer-to-peer lending platforms in India will be under the control and regulations of Reserve Bank of India, a gazette notification from the Indian government stated this on Wednesday.

    The notification effectively confirmed that all the registered Peer-to-peer platforms will be now recognized under the functioning of RBI.

    The gazette notification also cleared that the P2P platforms will be now termed as non-banking financial companies (NBFCs) as they are directly involved in the financial transactions.

    Upon this notification from the government, the RBI also approved the power to control the terms and policies of the P2P firms in the name of Non-banking financial companies.

    This notification also indicates that RBI will now release new regulations and rules to enhance the functioning of the P2P firms in India. Previously on 13th September, Sudarshan Sen - the executive director of RBI, has informed that “We are waiting for approval from the government to take control over the P2P loan platforms in India”.

    The P2P platforms are designed on the web portals in which the money lenders efficiently find the borrowers. Here there is no governing body and the transaction is directly maintained between the lender and the borrower.

    In other words, it can also be said that the P2P loan platforms don’t involve any middleman or third parties.

    As India is one of the fastest developing countries in the world, there is a great need for finance or capital for the developmental works, all around the country. This gave birth to this innovative concept of financial transactions. At present, there are some P2P firms which are offering services on the online platforms.

    According to RBI, P2P loan platforms are crowdfunding loan platforms which are used to raise loans with a specified rate of interest. Because of such platforms, it is feasible for the individuals to resolve the financial issues.

    The regulating body of RBI also stated that “P2P platforms have enough capability to soften the lending rates as no operational cost or third-party cost is involved in the transaction.”

    But again, RBI also highlighted on the negative effects of using such platforms as there is a regulating body.

    But from now onwards, it seems that the P2P platforms will function more effectively as there is a governing body to control and regulate the policies. With the confirmed notification, the CEO of P2peasy.com, Mr Sumit Sharma mentioned that “Now the investors can comfortably participate on the P2P lending platforms across the country”.

    In April 2016, RBI released a consultation paper which includes necessary regulatory frameworks for the P2P platforms. Some important highlights of that consultation paper include:
    1. P2P platforms will be managed as an individual company.
    2. A minimum capital of Rs 2 crore is required for a P2P platform.
    3. The funds will directly move from the lender’s account to the borrower’s account.
    4. A leverage ratio is highly necessary.
    5. The requirement of a business continuity plan is mandatory.
    6. The firms will be subjected to assuring confidentiality of the data.
    7. Assured returns must be prohibited.
    8. The loan recovery practices will be maintained as per the existing NBFCs.

    So, it is highly predicted that RBI will greatly focus on its consultation paper before implementing any further rules and regulations for the P2P firms in India.

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