Industry Members Seek Amendments and Clarifications from RBI on P2P Lending Regulations
Industry Members Seek Amendments to RBI Regulations on P2P Lending Platforms
In response to the Reserve Bank of India (RBI) tightening regulations for peer-to-peer non-bank lending platforms, industry members are gearing up to approach the central bank to seek amendments and clarifications.
The new rule, which mandates that funds in the escrow accounts of lenders and borrowers must be cleared within a day (T+1), is being contested by companies who argue that it is too stringent. The Association of P2P Lending Platforms is planning to request an extension of the timeline to T+2 or T+3 days.
According to a member of the association, the T+1 timeline is deemed harsh and impractical as it does not allow enough time for reconciliation and identifying cash flow. The association is currently gathering feedback from its members and intends to present the proposed T+2 or T+3 options to the RBI by the end of the week.
The RBI’s intention behind the regulations is to ensure that lenders’ funds do not remain with the P2P platform, thereby facilitating quicker returns to lenders once the borrower repays. The P2P lending industry in India is estimated to be worth Rs 7,000-8,000 crore, with around 20 licensed platforms registered with the RBI as NBFCs.
Under the new norms, P2P platforms are required to disclose past data, prompting industry members to seek clarification on how the regulator expects these data points to be displayed. The rules are aimed at preventing P2P platforms from operating as virtual alternative deposit-taking entities, promising liquidity and reinvestment with tacit interest rate assurances.
Current regulations restrict lenders from investing more than Rs 50 lakh on a platform, limit individual borrower investments to Rs 50,000, cap total borrower loans at Rs 10 lakh, and set a maximum loan maturity of 36 months. Industry members are hopeful that through dialogue with the RBI, amendments can be made to ensure a balance between compliance and practicality in the P2P lending sector.
