RBI issues framework for the registration and operation of Non-Banking Financial Company – Peer to Peer (‘P2P) Lending Platform in India. RBI defines ”Peer to Peer Lending Platform” as an intermediary providing the services of loan facilitation via online medium or otherwise, to the participants in the. Along with P2P lending platform, master direction also contains definitions of other terms like participant, nonperforming assets and NBFC- P2P.
RBI permits NBFC – P2P to acts an intermediary that provides an online marketplace or platform to the participants involved in Peer to Peer lending, however, restricts them to lend on its own. In addition, NBFC – P2P is restraint to provide or arrange any credit enhancement or credit guarantee and cannot cross sell any product other than insurance products. RBI disallows international flow of funds and permits to store and process all data relating to its activities and participants on hardware located within India.
The master direction further mentions about procedure of registration and states the following eligibility criteria for registration :-
(i) No non-banking institution other than a company can undertake the business of Peer to Peer Lending Platform.
(ii) NBFC-P2P cannot commence or carry on the business of a Peer to Peer Lending Platform without obtaining a Certificate of Registration (“CoR”) from the Bank. In addition, states that an entity carrying on the business of a Peer-to-Peer Lending Platform as on the effective date of these directions can continue to do so, subject to the certain conditions.
(iii) Every company seeking registration with the Bank as an NBFC-P2P should have a net owned fund of not less than rupees 20 million or such higher amount as the Bank may specify.
RBI highlights that the validity of the in- principle approval issued by the Bank would be of 12 months from the date of granting the approval.
Thereafter Master Directions mentions about the prudential norms wherein NBFC P2P are required to maintain the Leverage Ratio not exceeding 2 and puts a cap of Rs. 10,00,000/- for aggregate loans taken by a borrower at any point of time from any of the P2Ps.
RBI also specifies about the fund transfer mechanism and states about the transparency and disclosure requirements for NBFC- P2P. The master direction outlines the Fair Practices Code, information technology framework and data security and business continuity plans.