What is an NBFC-P2P?
The Reserve Bank of India (RBI), on October 4, 2017, issued directions for non-banking financial companies (NBFC) that operate peer-to-peer (P2P) lending platforms to help regulate this relatively new industry. Any company that wishes to operate in the P2P lending space will now have to obtain a Certificate of Registration from RBI. These entities will now be treated as Non-Banking Finance Companies-Peer to Peer Lending. The certification will help build credibility in the industry as a whole and help the customers identify serious players whom they can confidently approach for their funding requirements.
What are the benefits of RBI regulating the P2P lending industry?
The P2P industry being regulated ensures that only players who adhere to specific standards of operations and stringent information security guidelines are allowed to function. This helps build the credibility in the Industry as a whole.
AnyTimeLoan.in would now be compulsorily required to maintain specific networth, meet set prudential and leverage norms, have a fit and proper board at all times and ensure fair and transparent operating principles in the conduct of it's business. AnyTimeLoan.in would also have to contribute repayment track record of each and every loan to CIC’s (Credit Information Centres) on a periodic basis. This would ensure more information for all other banks and NBFCs to take informed credit decisions and will also ensure better repayment discipline from borrowers through the P2P platform.
What is an NBFC-P2P platform?
A Peer to Peer Lending Platform (NBFC-P2P) is a non-banking institution which carries on the business of a Peer to Peer Lending Platform. An NBFC-P2P platform typically refers to a digital platform that helps borrowers connect with investors.
The following information, based on the Prudential norms in the RBI directions, might be useful for borrowers and lenders desirous to know more about a P2P platform:
Limit for lending: An investor cannot lend more than Rs. 10 Lakhs at any point of time, across all P2P platforms of which he/she is a registered customer.
Limit for borrowing: One cannot take a loan of more than Rs. 10 Lakhs across all P2P platforms.
Exposure: For a single lender, the exposure to the same borrower, across all P2Ps, shall not exceed Rs. 50,000/-.
Loan maturity: The maturity of the loans shall not exceed 36 months.
Read more on the Master Directions from RBI in detail here. (add this link here as embedded: https://www.rbi.org.)
Benefits of NBFC-P2Ps to the end consumer
Lightning fast application and quick processing: Unlike the slow and tedious loan processes of banks, On Demand NBFC-P2P like AnyTimeLoan.in is lightning fast, as we use machine learning algorithms and other technologies to process loan applications and determine the creditworthiness of an individual. Gone are the days when one needed to have a near perfect CIBIL score in order to avail a loan. P2P companies take into account factors like the educational qualification, net salary, locality, spending behaviour and the like to determine the creditworthiness of a person.
Lending and borrowing is set to get easier. With technological penetration even in remote areas and the world adopting digitization, borrowing and lending platforms are set to become the norm, rather than the exception. The financial services sector of India is getting bigger everyday. However, there has been a gap in borrowing and lending, which is being effectively filled by NBFCs:
- 1. Innovative financial services are needed in order to bridge the financing gap, specially for micro, small and medium industries. Here is where NBFCs are playing a pivotal role.
- 2. The interest rates offered by an NBFC are usually higher than that of a bank, as there is no middle-man involved.
- 3. Bank excluded customers lend themselves naturally to be served by NBFCs for their diverse credit needs.
- 4. NBFCs make it more convenient for borrowers and lenders to transact seamlessly on the same platform.
Growth of fintech
The fintech market is undergoing a phase of rapid growth and is forecasted to cross $2.4 Bn by 2020, as per reports by KPMG India and NASSCOM. The P2P lending landscape in India is also poised to grow into a $4 Bn-$5 Bn industry by 2023.
Increasing digital penetration and growing awareness of digital transactions is helping fintech build and penetrate into new markets. With the sector now being regulated by RBI, there will be better transparency in the system and higher confidence amongst participants, thereby leading to better growth of the industry as a whole.