An Overview of P2P Lending License Peer to peer lending platforms are online platforms to raise loans, which are to be paid back with interest. The borrower may either be an individual or a legal entity. The peer to peer lending platforms in India may set the interest rate to be charged on the loans, or the decision may be made mutually between the parties. In the space of P2P lending, obtaining P2P lending license is mandatory. In simple words, we can say that Peer to peer lending is a form of social lending under which individuals can lend or borrow money. There is no involvement of any financial institution. Therefore, lenders are free to choose borrowers. This concept of lending is gaining popularity among lenders as they get a higher rate of interest. The Reserve Bank of India is an apex body that grants a peer to peer lending license. Acquiring P2P lending license is a charm with experts at Enterslice. What are the Characteristics of a Peer to Peer Lending License? Peer to peer lending license is revolutionizing the global financial market and reshaping the financial industry over the past few years by introducing new innovative modules and lending services. Peer to peer lending platforms can be used, where we only need to provide the necessary information from sitting at home/ office and within hours our loan will be processed and approved. Here are the following characteristics of peer to peer lending platforms in India- Peer to peer Lending platforms involve online transactions The prior relationship between lenders and borrowers is not necessary P2P lending license is a mandatory requirement for those who are operating P2P lending platforms. On peer to peer lending platforms in India, lenders can freely choose borrowers to invest in. Some platforms, however, offer secondary markets where investors can sell their loans to other investors if they need to exit their positions early. Regulatory Framework of P2P Lending License While most of the crowd-funding- be it, equity, debt or fund-based, falls under the purview of the capital market regulator-SEBI, the P2P lending license is regulated by the Reserve Bank of India. Different jurisdictions of the world treat P2P lending differently. In some countries, they are identified as banks, while in other countries, they are treated as intermediaries. Advantages of Peer to Peer Lending Platforms in India Peer to peer lending platforms in India has gained prominence in recent years with its numerous benefits for both borrowers and lenders. Here are some of the most remarkable advantages of the Peer to peer lending platforms in India: 1. Lesser Interest Rates One major benefit of P2P lending is the ability for borrowers to secure lower interest rates compared to what they typically get from a regular bank or credit union. P2P lenders with a P2P lending license can provide loans at a lower cost compared to traditional financial institutions due to their lack of similar overhead expenses. 2. More Lending Opportunities Peer to peer lending platforms in India with a P2P Lending License allows more people, including those with a bad credit history or no collateral, to access loans that may not qualify for traditional financial services. This could help improve financial inclusion and offer loans to individuals who were previously left out of the conventional banking system. 3. Transparency & Control Peer to peer lending platforms with a P2P lending license offer greater transparency and control to lenders and borrowers compared to traditional financial institutions. On the flip side, borrowers can review the loan specifics and evaluate them against other loan choices before making a choice. 4. Minimizes Default Risk P2P lending websites with a P2P lending license often utilize advanced methods to assess the creditworthiness of borrowers. This lowers the chance of non-payment and boosts the probability of repayment for creditors. 5. Increased Financial System Diversity P2P license enhances financial system diversity by offering different funding choices to individuals and businesses. This could lessen dependence on conventional financial institutions and promote competition, leading to a greater variety of innovative and customer-oriented financial services. Eligibility Criteria for Obtaining P2P Lending License The peer to peer Lending platforms in India come under the purview of the Reserve Bank of India, taking the definition of NBFCs under section 45I(f)(iii) of the RBI Act. These are the criteria fulfilled for obtaining a P2P lending license to be fulfilled: The company is incorporated in India; The company has the necessary technological, entrepreneurial and managerial resources to offer such services to the participants; The company has the adequate capital structure to undertake the business of Peer to Peer Lending Platforms; The promoters and the Directors of the company are fit and proper; The general character of the management of the company is not prejudicial to the public interest; The company has submitted a plan for or implemented a robust and secure Information Technology system; The company has submitted a viable business plan for conducting the business of Peer to Peer Lending Platforms; Public interest shall be served by the grant of CoR; Any other condition as may be specified by the Bank, fulfilment of which, in the opinion of the Bank, is necessary to ensure that the commencement of or carrying on the business in India shall not be prejudicial to the public interest. Net Owned Fund for Obtaining P2P Lending License As per the RBI’s revised master directions, only entities with a net-owned fund of Rs 2 Crore are eligible to apply for a P2P lending license from the Reserve Bank of India. Documents Required to Apply for P2P Lending License There are certain documents required for obtaining a P2P lending license: Certificate of incorporation MoA & AoA The company has acquired entrepreneurial and technological resources. The company must have a P2P lending platform portal. Business plan Balance sheets should be free from transactions initiated by borrowers and lenders. Use WhatsApp to reach out to experts at Enterslice and apply for a P2P lending license in an easy peasy way. How to Get a P2P License in India? To obtain a P2P license in India, research local regulations, establish a legal entity, and create a compliant business plan. Develop your lending platform, submit necessary documentation and fees to the regulatory authority, and ensure ongoing compliance after obtaining approval. The process to apply for P2P lending license is showcased below: Each NBFC-P2P, whether already in operation or planning to start, must submit a registration application to the Mumbai branch of the Bank's Department of Regulation using the specified form. NBFC-P2Ps already in operation must submit their applications within three months of the issuance of these Guidelines. The bank for P2P lending license registration shall require the condition mentioned above in the eligibility criteria. After being satisfied with the eligibility criteria already discussed above, the RBI can grant in-principle approval for setting up peer to peer lending platform. The in-principle approval issued by the Bank will remain valid for twelve months starting from the approval date. Within this period, the company must establish the technology platform, finalize all necessary legal documents, and provide updates on compliance with the conditions for obtaining preliminary approval from the Bank. Once the Bank is certain that the entity is prepared to start operations, it may provide a Certificate of Registration as an NBFC–P2P, with conditions as deemed appropriate by the Bank. Still confused about the process of obtaining a P2P lending license? Contact the Enterslice team for streamlining the process. How does the Peer to Peer Lending Platforms Work? Lenders and investors can match their risk tolerance with their investments because they can select from a wide range of borrowers. P2P networks give lenders access to important data regarding the credit histories of borrowers, empowering them to make wise choices. Investors can spread their money across several borrowers to reduce risk. Through peer to peer lending platforms, borrowers submit a list of required papers to apply for a loan. This includes documents proving their identification, like a passport; proving their address, like a bank statement or utility bill; and proving their income, such as pay stubs or tax returns. Borrowers could also be required to submit supporting papers and references with their loan application. Market Size of P2P Lending License The Indian P2P Lending industry is currently valued at roughly ₹7,000-8,000 crore. In India, around 20 P2P lending platforms exists. They are registered with the Reserve Bank of India as Non-banking Financial Companies. The progressive segment is capturing the attention of entrepreneurs to get P2P lending license. The P2P lending market in India is anticipated to grow at a CAGR of 18.5% between 2024 and 2030. Revenue Stream for Peer to Peer Lending Platforms in India Income sources for peer to peer lending platforms in India consist of fees for initiation, administration, and graduated penalties for delayed payments. Investors earn income from success fees, premium memberships, and secondary market transaction fees. Extra income is generated by providing credit scoring models and financial literacy tools. Strategic alliances for generating leads and collecting debts also play a role. New trends include Open Banking for evaluating risks and incorporating alternative data for complete borrower profiles. Fees for Obtaining a P2P License in India The fees for obtaining a P2P license range from Rs.8 to Rs.9 Lakh. However, the fees for securing a P2P lending license may be extended if your requirements increase. What is the Time Required to Obtain P2P Lending License? The time taken to obtain a P2P lending license is 9 months from the date of applying. There may be an extension in the timeline in case of regulatory delay. To avoid delay in the timeline for getting a P2P lending license, speak to professionals at Enterslice. Why Trust Enterslice to Secure a P2P Lending License? Enterslice has proved its mettle in the space of consulting for regulatory licensing. We have more than 1 decade of experience in acquiring P2P lending license for passionpreneurs. Given below are the reasons why we are the most trusted business consulting firm to get a peer to peer lending license- Dominating the Industry with a 75% Market Share 99% Success Rate in Securing P2P Lending License Saved 10 Lakh+ Hours of Entrepreneurs Documentation Support for Getting P2P License Proper Understanding of the Regulations for Peer to Peer Lending Platforms in India End-to-end Assistance in Obtaining a Peer to Peer Lending License 24/7 Dedicated Support to Resolve the Queries in Acquiring a P2P Lending License Ensures up to 45% Reduction in Compliance Burden for Obtaining a Peer to Peer Lending License.
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