Peer-to-peer (P2P) lending industry body has now turned to the Finance Minister Nirmala Sitharaman to air their grievances regarding the Reserve Bank of India (RBI) norms, which limit the lending to INR 10 Lakh per customer.
The platforms have been seeking relaxation in the guidelines ever since its implementation in 2018. In August this year, the Association of NBFC Peer-to-Peer Lending Platforms had also written to RBI to highlight their issue.
The platforms demand an immediate extension of the limit to INR 1 Cr for retail investors, and remove the INR 10 Lakh cap on P2P lending for regulated platforms.
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Rajiv M Ranjan, the secretary of the association, wrote, “In the last 18 months since the guidelines were announced, the biggest challenge being faced by the nascent industry is the lender limit of Rs 10 lakh. This single issue is threatening the very existence of the industry.”
In a reply to the letter, RBI has sought details of instances in which the NBFCs platforms had to turn down potential customers due to the guidelines.
The Steering Committee Report On Fintech Startups
With the FM meeting, the P2P lending platforms want to highlight the government’s steering committee report of September 2019, which focuses on the development of the recently regulated P2P lending platform.
“Potential hindrance in terms of restrictions on overall and individual exposure limits may be reviewed and options like allowing Mudra Bank to directly fund or co-fund SMEs and MSMEs through P2P platforms may also be examined as an alternative credit delivery channel,” the steering committee report said.
It also recommends that the finance ministry develop a marketplace model for debt financing in India by reforming the present model of P2P lending platforms. “Platform-based lending models are different from the traditional lending models. They seek to overcome the information asymmetry problem not by taking lending decisions, but by helping consumers take their own lending decisions. Applying the lens of traditional lending to these models may stifle their growth.”