RBI issues guidance for peer to peer lenders


The Reserve Bank of India (RBI) issued Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017, on 4 October. By way of these master directions, the RBI has brought peer to peer lending platforms, also known as crowdfunding platforms, within its regulatory supervision and classified them as non-banking financial companies (NBFC-P2Ps).

The master directions make provisions for the registration of existing as well as prospective NBFC-P2Ps and mention the eligibility criteria. The scope of activities of NBFC-P2Ps has been set out in the master directions. NBFC-P2Ps may: act as an intermediary providing an online marketplace or platform to the participants involved in peer to peer lending; not raise deposits as defined under company law; not lend on its own; not provide or arrange any credit enhancement or credit guarantee; not facilitate or permit any secured lending linked to its platform i.e. only clean loans will be permitted; not permit international flow of funds; undertake due diligence on the participants; and undertake credit assessment and risk profiling of the borrowers and disclose the results to their prospective lenders.

Prudential norms as well as operation guidelines have also been specified. NBFC-P2Ps are required to obtain membership of all credit information companies and submit data to such companies as prescribed under the master directions. The master directions also set out a “fit and proper” criterion and transparency and disclosure requirements as well as a fair practices code for NBFC-P2Ps.

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