The Reserve Bank tightened norms for Non-Banking Financial Company – P2P Lending (Peer to Peer) Platforms (NBFC-P2P Lending Platform) to improve transparency and compliance.
Key Regulation:
- The RBI has established specific norms for NBFC-P2P lending platforms to safeguard both lenders and borrowers.
- Lender Exposure Cap: The total exposure of a lender across all P2P platforms is capped at Rs. 50,00,000.
- P2P platforms are prohibited from promoting P2P lending as an investment product and are not allowed to cross-sell any insurance products.
- The regulations emphasize the role of P2P platforms as intermediaries, ensuring they do not function beyond their defined scope.
About P2P Lending Platforms:
- Peer-to-peer (P2P) lending facilitates direct lending and borrowing between individuals through digital platforms, bypassing traditional financial institutions.
- Borrowers and lenders register on a P2P platform, where the platform acts as an intermediary.
- This method allows individuals to obtain loans directly from others without the need for a bank or financial institution as a middleman.
- In 2017, the Reserve Bank of India (RBI) brought P2P lending under its regulatory framework to ensure transparency and protect participants.
- To operate as a P2P platform, an entity must register as a Non-Banking Financial Company (NBFC) and secure permission from the RBI.
- The minimum capital requirement for setting up a P2P platform is Rs. 2 Crores.
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Frequently Asked Question:
What are the new RBI regulations for NBFC-P2P lending platforms?
The RBI regulations include a lender exposure cap of Rs. 50,00,000 and restrictions on promoting P2P lending as an investment product.
How do NBFC-P2P lending platforms function?
NBFC-P2P lending platforms act as intermediaries, facilitating direct lending and borrowing between individuals.
What is peer-to-peer (P2P) lending?
Peer-to-peer lending facilitates direct lending and borrowing between individuals through digital platforms, bypassing traditional banks.
What is the role of NBFCs in P2P lending?
NBFCs operate P2P lending platforms as intermediaries, ensuring compliance with RBI regulations.
How does P2P lending differ from traditional banking?
P2P lending allows individuals to lend and borrow directly without a traditional bank as an intermediary.