In a bid to bring more regulations to peer-to-peer lending (P2P) lending platforms and protect consumer interest, the Reserve Bank of India (RBI), on Monday (December 23), said that the permissible limit for lenders on these platforms should not exceed INR 50 Lakhs at any given point of time.
In a notification, RBI said that the aggregate exposure of a lender to all borrowers at any point of time, across all P2P platforms, shall be subject to a cap of INR 50 Lakh. Moreover, the RBI also notified that investments of these lenders should also remain consistent with their net-worth.
RBI has also made it mandatory for lenders investing more than INR 10 Lakhs on P2P platforms to have a minimum net worth of INR 50 Lakhs. “The lender investing more than INR 10 Lakhs across all P2P platforms shall produce a certificate to P2P platforms from a practising chartered accountant certifying minimum net-worth of INR 50 Lakhs,” said RBI.
Moreover, to protect the interest and assure trust of lenders on these platforms, RBI said that all the lenders need to submit a declaration to P2P platforms citing that they have clearly understood the risks, such as no assurance of return on the principal amount, associated with lending on these platforms.
Currently, all the lending on P2P platforms is done through an escrow account, which acts as a secured third-party platform for the transaction. These third-party services are mostly provided by banks promoted by lenders and borrowers. “Escrow accounts to be operated by bank promoted trustee for transfer of funds need not be mandatorily maintained with the bank which has promoted the trustee,” RBI now clarified in the statement.
The recent changes in the norms are updated in the Master Directions – Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017, RBI notified in the statement.
In India, some of the popular P2P platforms are LenDenClub, Faircent, RupeeCircle, among others. While, LenDenClub, in August 2019, raised $1 Mn in a Pre-Series A funding round, Faircent also raised a fresh funding round from Das Capital, Gunosy Capital, among others in the same month.