Convenient Registration of P2P Lending platform


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– Transparent Costs

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Peer to Peer Lending License

Peer to Peer lending is a method of debt financing under which individuals can lend or borrow money without any financial institution getting involved as an intermediary. An online platform helping to raise and distribute loans which are to be paid back with interest. The platform website may set an interest rate to be charged on the loans or it may be decided mutually between these two parties themselves. While taking a loan from a bank, the rate of interest may be higher, with many formalities involved. On this platform, borrowers can borrow money easily. They operate online with low overhead expenses, acting as aggregators. This mode is proving beneficial for lenders & borrowers, as well as the start-ups.

P2P lending platforms are technology-driven companies established under the Companies Act. The companies are regulated by the Reserve Bank of India.

To set-up your company as P2P lending platform, you need to apply for a license from RBI.

Scope of Peer to Peer Lending in India

The online market is growing at a rapid speed. Not only for products but also all kinds of services are being provided online. The businesses, in order to keep up with the demand, are offering loans and investments online as well. P2P Lending provides a route for a wide cadre of investors and borrowers to meet at a common platform to satisfy their financial needs. 

The rise of P2P lending industry in India was especially boosted by the 2016-2017 slowdown in lending by the banks. This slowdown forced borrowers to seek other options to seek finances. 

This industry is expected to grow into a $ 5 billion industry by 2023. 

Types of P2P Lending Platforms

Peer to Peer Lending can be classified into following types:

To become an NBFC, you need

There are a few conditions to be met before you can apply for a license of P2P lending platform to RBI. To start with, such platforms can only run by the NBFCs or registered companies in India.

  • Company registered under the Companies Act, 1956 or 2013.

  • Have a Net Worth of Rs. 2 crore.

  • After your application, RBI would grant the NBFC Certificate of Registration (CoR) for P2P lending

  • All P2P platforms are to be registered with the RBI as an NBFC. However, an existing NBFC is not authorized to set-up as an NBFC P2P.

Basic requirements for obtaining P2P Lending License

The P2P Lending platforms are covered under Section 45 I (f)(iii) of the RBI Act. The regulatory frameworks stipulates:

RBI Approval

  • If a new company seeking CoR fulfils all the conditions mentioned above, and upon fulfilment of such other conditions as RBI may deem fit, RBI may grant in-principle approval to set up a P2P Lending Platform.

  • The in-principle approval holds valid for a period of 12-months from the date which it is granted.

  • During these 12-months, the company must set-up its technology platform, perform all required legal documentation, and report all the compliances to RBI that were to be fulfilled.

  • If RBI is satisfied that the company is ready for commencing the operations, it shall grant the CoR.

Funds Transfer Mechanism for P2P Lending Platforms

  • On P2P Lending platforms, the funds are to be transferred between the participants via escrow account mechanism, which shall be operated by a trustee.

  • Minimum 2-escrow accounts to be maintained – one for receiving the amount from lenders pending disbursal and the other for the amount collected from borrowers.

  • Transactions to be made only through bank accounts. Cash transactions are absolutely forbidden.

  • On P2P Lending platforms, the funds are to be transferred between the participants via escrow account mechanism, which shall be operated by a trustee.

  • Minimum 2-escrow accounts to be maintained – one for receiving the amount from lenders pending disbursal and the other for the amount collected from borrowers.

  • Transactions to be made only through bank accounts. Cash transactions are absolutely forbidden.

IT Framework & Data Security

The business of the P2P Lending Platform is primarily IT-driven.

Sufficient safeguards must be in place in the IT systems to ensure the security of data.

Audit of the internal information systems to be carried at least once every 2-years by CISA certified external auditors. 

This Audit report to be submitted to the Department of Non-Banking Supervision (DNBS) of RBI, within 1-month of submitting the report by the external auditor.

Reasonable arrangements must be employed to ensure that the loan agreements between the parties will continue to be managed by a 3rd party, if the P2P ceases to carry on the business.

Frequently Asked Questions

What is P2P lending platform?
What is loan facilitation?
How to get P2P Lending License?
How to get P2P lending platform registered?
Who is eligible for license as P2P Lending Platform?
What are the conditions to obtain a peer to peer lending license?
How much capital is required to obtain a P2P lending license?
P2P lending model is regulated by which authority in India?
What is the process to obtain a P2P lending license?
How has the government made P2P lending safer?
What are RBI stipulations for P2P Lending Platforms?
Is an intermediary originating loans exclusively for a lender be considered as a P2P Lending Platform?
Is a DSA originating loans online or offline for an NBFC/Bank considered a P2P platform?
Is a lender having an exclusive platform for disbursing loans considered as P2P platform?
Will any intermediary connecting participants be considered as a P2P platform?
Is it mandatory for a company to wait for 1-year before registration with RBI?