RBI tightens rules for NBFC-P2P lending platforms

RBI tightens rules for NBFC-P2P lending platforms

Reserve Bank of India on August 16 tightened rules for peer to peer lending platforms  as some of these entities have violated regulations. The banking regulator said the platforms shall not assume any credit risk, provide credit enhancement or guarantee.

"An NBFC-P2P shall not provide or arrange any credit enhancement or credit guarantee. NBFCP2P shall not assume any credit risk, either directly or indirectly, arising out of transactions carried out on its platform. In other words, entire loss of principal or interest or both, if any, in respect of funds lent by lenders to borrowers on the platform shall be borne by the lenders," said RBI in its master direction to the platforms.

The RBI has been intensifying their scrutiny of rapidly-growing consumer finance services, including P2P lending, to prevent systemic risks and protect consumer interest.

An NBFC-P2P shall not cross sell any product except for loan specific insurance products, said the banking regulator.

"An NBFC-P2P shall be required to disclose the following: publicly disclose portfolio performance including share of non-performing assets (NPAs) on a monthly basis and segregation by age on its website. It may be noted that such disclosures shall also include all losses borne by the lenders on principal or interest or both," RBI further said.

The P2P platform shall not promote peer to peerlending as an investment product with features like tenure linked assured minimum returns, liquidity options, etc, instructed RBI.

The aggregate exposure of a lender to all borrowers at any point of time, across all P2P platforms, shall be subject to a cap of Rs 50 lakh provided that such investments of the lenders on P2P platforms are consistent with their net worth. The lender investing more than Rs 10 lakh across P2P platforms shall produce a certificate to P2P platforms from a practicing Chartered Accountant certifying minimum net-worth of Rs 50 lakh, said RBI.

The platforms shall not utilise funds of a lender for the replacement of any other lender, the RBI said.

LendenClub, Lendbox, Liquiloans, Faircent, Finzy are some of the prominent NBFC-P2Ps.