In the present scenario the loans extended by the NBFCs to MSMEs grew rapidly and the experienc...
Peer 2 Peer Lending (P2P Lending) is the new player in the financial market of loans and advances. It is an online platform where borrowers of funds meet the lender of funds. The platform acts as the mediator involved in the task of ascertaining the credit rating of the proposed borrowers by charging fees at a flat rate from them and also providing documentation services, financial advice, etc.
Currently, P2P Lending is the unregulated sector of the Indian economy. However, RBI is expected to release the guidelines on this sector very soon, based on the belief that although the sector is yet to show much gauge and adhesion, there is a requirement of a strict watch on its operations. Talking upon the regulatory framework for P2P lending, various experts are of the belief that there should be a certain cap on the interest rates or the number of funds being traded on such platform. The increasing demand for finance from various sections of society cannot be catered to by banks and NBFCs alone, hence the importance of the online platform for lending and borrowing money will gain much importance over the time.
As P2P Lending arises as the next level of online lending in a credit famished country like India, RBI is also learning to keep an eye on other digital innovations happening in the NBFC world. The RBI is worried about certain malicious individuals having surplus cash, who should make use of such platform for lending money at higher interest rates. This will eventually lead to mishaps in the financial market and exploitation of small borrowers.
Therefore, there is a need for strict vigilance along with the proper space to grow and fulfill the increasing demand for funds. For the same reason, RBI has issued a consultation paper in April 2016 on the Indian P2P lending framework that has been taking root in India. A Gurugram based company, Fair Assets Technologies India engaged primarily in the business of Peer to Peer Lending and has diversified in the area of gold loans too.
The much-anticipated regulations in the field of P2P lending are expected to bring streamlined solutions for the credit-related problems prevailing in the country, as well as strengthen the framework within which the sector will operate.
On the basis of the above-mentioned suggestions and guidelines, RBI may anytime soon come up with its regulatory framework governing the working of these platforms. The framework may also specify that no entity, other than the company shall undertake the activities of P2P lending as individuals, proprietorship, partnership or Limited Liability Partnerships would not fall under the purview of the RBI.