P2P Lenders Seek RBI Clarity On Secondary Market Participation Of Their Investors

The peer-to-peer (P2P) lending sector has reportedly written to the Reserve Bank of India (RBI), seeking clarity on certain features around instant liquidity, flow of funds between borrowers and lenders and automatic reinvestment of gains.

As per ET’s report, industry insiders believe that by offering the right products with options for on-demand liquidity and access to secondary market transactions, P2P lending can become an attractive tool for investors looking to diversify into new asset classes.

If approved by the RBI, lenders on P2P platforms would have the option to sell their outstanding loans midway through the term, allowing them to either exit the investment or reinvest the funds.

A spokesperson for the Association of P2P Lending Platforms confirmed they have approached the banking regulator for guidance on secondary market operations, added the report.

Sector participants have requested clarity from the RBI’s Department of Regulation regarding secondary market operations, which have been in practice since the regulations were introduced in 2017, it further said.

This development comes as the Reserve Bank of India has announced new guidelines for digital lending, stipulating that peer-to-peer (P2P) lending platforms are prohibited from entering into default loss guarantee (DLG) agreements with non-banking financial companies (NBFCs). 

RBI data reveals that 26 P2P lending companies are regulated, however, ET reported that only about 10 are currently operational, while the rest are either inactive or considering exiting the sector.

Fintech startups such as Uni, CRED, MobiKwik, BharatPe and RupeeCircle are among some of the platforms that offer P2P lending, allowing individuals to lend to other individuals. 

Meanwhile, crypto exchange Binance has halted the cash payment option for P2P trades in rupees.