1. Capital
Requirement:
RBI has mandated
the capital requirement for the existing as well as the aspiring NBFC-P2P.
“Every company
seeking registration with the Bank as an NBFC-P2P shall have a net owned fund
of not less than rupees twenty million or such higher amount
as the Bank may specify”
2. Effect of
Guidelines on an existing p2p lending
platforms in india:
The guideline has
mandated registration of existing NBFC-P2P to the Department of Non-Banking
regulation. An existing peer to peer
lending platforms shall complete the application within three months from
the date of issuance of the Directions.
“Companies that are
undertaking the business of peer to peer lending Platform,
as defined at paragraph 4(1)(v) of these directions, as on the date of effect
of these directions, shall apply for registration as an NBFC-P2P to the Bank
within 3 months from that date. Such companies, which have applied to the Bank
for registration as an NBFC – P2P, shall be permitted to continue the business
of a Peer to Peer Lending Platform till their application for issuance of CoR
is rejected, subject to such conditions, including winding down of business, as
the Reserve Bank may impose.”
3. Lending
Guidelines:
The RBI, in the
guidelines, has sought to reduce the risk to retail investor. The lending
amount per person has been capped to one million rupees (INR 10,00,000/-)
across NBFC-P2P. The guideline however is silent on institutional lenders.
Also, exposure of a single lender to a borrower across NBFC-P2P has been capped
to rupees fifty thousand (INR 50,000/-).
The capping amount
is beneficial for retail lenders as it would reduce the risk. However, it would
be a pain point for HNIs and UHNIs who understand their risk and are interested
in taking a bigger exposure.
“The aggregate
exposure of a lender to all borrowers at any point of time, across all peer to peer borrowing sites,
shall be subject to a cap of 10,00,000/-.”
4. Nature of Loans:
The guidelines have
only allowed NBFC-P2P to originate unsecured loans linked to its platform. It
is good as well as bad. Secured lending products are complex in nature and RBI
might have thought about instances of mis-selling of those Online loans. However, this
will affect innovation in the sector to some extent.
“not facilitate or
permit any secured lending linked to its platform; i.e. only clean loans will
be permitted”
5. Capital and
Return Guarantee:
RBI has mandated to
receive explicit affirmation from participating lenders about the risks
involved in the transaction. NBFC-P2P shall not guarantee any return and entire
principal may be lost in case of a default by a borrower. NBFC-P2P also cannot
guarantee the recovery of loans.
“not provide or
arrange any credit enhancement or credit guarantee”.
6. Focus on
Transparency:
The guidelines have
emphasized on transparency during the activity of lending and borrowing.
NBFC-P2P are required to disclose personal identity, required loan amount,
interest rate and credit score, T&C of loan, likely returns, fees and
taxes.
“An NBFC-P2P shall
be required to disclose the following: (i) to the lender
(a) details about
the borrower/s including personal identity, required amount, interest rate
sought and credit score as arrived by the NBFC-P2P.
(b) details about
all the terms and conditions of the loan, including likely return, fees and
taxes;”
The emphasis is
also on privacy as only a few details are asked to be shared between the
lenders and borrowers.
7. Borrowing Limit
and CIC reporting:
This is a
significant step in the guidelines to discourage rampant borrowing across
NBFC-P2P. In the best p2p lending sites
for investors, A single borrowing individual can, at a time, borrow not
more than one million rupees (INR 10,00,000/-) across all NBFC-P2P. Also, the
details of the loan are to be mandatorily reported to CIC in the country.
“The aggregate
loans taken by a borrower at any point of time, across all peer to peer sites, shall be subject to a
cap of ` 10,00,000/-.
NBFC-P2P shall: (i)
keep the credit information (relating to borrower transactions on the platform)
maintained by it, updated regularly on a monthly basis or at such shorter
intervals as may be mutually agreed upon between the NBFC-P2P and the CICs”
Click to know more: https://www.lendenclub.com/lending/
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