Poised To Touch $5 Bn By 2023, The Indian P2P Lending Market Is Home To Over 30 Players
After conquering the Indian digital payments sector, homegrown unicorn Paytm has now set its eyes on the country’s burgeoning alternative lending market. As per reports, the company is in the process of seeking a licence from the RBI to operate a P2P lending platform.
Documents filed with the Ministry of Consumer Affairs (MCA) state that Paytm’s board passed a resolution on February 7 “to carry on the business of NBFC-P2P lending platform as an intermediary to provide the services of loan facilitation via web or app medium or otherwise.”
Some sources have revealed that the digital payments giant might have already sought a licence from the central banking institution for the same. The company, however, declined to comment on the matter, when Inc42 contacted its communications team.
According to people close to the development, Paytm is aiming to leverage its 7 Mn offline merchant base to gain a stronghold in the country’s peer-to-peer lending landscape. To that end, the Vijay Shekhar Sharma-founded company has already started disbursing short-term, small-ticket loans to these offline merchants.
Because it does not have a lending licence as of yet, the home-bred digital payments behemoth is issuing the loans through NBFC partners.
Commenting on the development, a source requesting anonymity said, “They will be starting with short-term loans and the intent is to extend it to large ticket sizes and also loans catering to the larger horizon. Obviously, the first step is to start by releasing small value loans and this will be extended to other financial products too including insurance, going forward.”
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Incidentally, earlier this week, Paytm announced that it recorded a four-fold jump in its annualised gross transaction value (GTV) to $20 Bn (INR 1.3 Lakh Cr), up from $5 Bn in March 2017. With a comprehensive suite of payments, commerce and financial services products, the company currently registers over 1 Bn transactions per quarter.
What’s Been Happening In The Indian P2P Lending Space
In case Paytm is successful in procuring the licence, it would be the first Indian unicorn to enter the country’s still-nascent P2P lending industry, which is currently home to more than 30 players such as including Faircent, LendBox, LenDenClub, IndiaMoneyMart, Monexo, Rupaiya Exchange, LoanBaba, CapZest, i2iFunding and many more.
Recently, in January, a number of these platforms came together to form the Association of P2P Lending Platforms. Headed by i-Lend founder Shankar Vaddadi, with Faircent founder and COO Vinay Mathews acting as the Vice President, the association will work in conjunction with the government and regulatory authorities on matters of compliance in P2P lending. Ultimately, the objective is to promote the cause of financial inclusion in the country.
Earlier in October 2017, the RBI released a list of directives pertaining to the registration and operation of NBFC-P2Ps in a draft, titled “Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017”
In its new guidelines, the RBI mandated a $307K (INR 2 Cr) capital requirement for all P2P lending companies, in a bid to ensure that lending platforms have enough “economic skin” in the game. Additionally, these companies must ensure that the aggregate exposure of a lender to all borrowers at any point of time across all P2Ps does not exceed $15,351 (INR 10 Lakh).
Similarly, the country’s central banking institution also placed a cap of $15,351 (INR 10 Lakh) on the total amount that can be borrowers at any point of time across all P2Ps. Further, a single investor is allowed to lend only $767.5 (INR 50,000) at any given point of time.
Poised to grow into a $4 Bn-$5 Bn industry by 2023, the Indian P2P lending market, although relatively young compared to the established markets in China, the US and Europe, has been growing at a tremendous pace, post the institution of regulations by the RBI. Its growth will likely receive a major boost if a prominent digital payments player like Paytm decides to enter the space.
(The development was reported by ET)