Peer-to-peer (P2P) lending platforms are grappling with the fallout from stricter regulations enforced by the Reserve Bank of India (RBI) and plan to request the regulator to review the rules.
The Association of P2P Lending Platforms, comprising 11 prominent lenders such as Liquiloans, Lendbox, LenDenClub and Faircent, will meet RBI officials this week to seek amendments and clarifications on the new rules.
The RBI's directive, issued on August 16, has sent shockwaves through the sector. The updated guidelines aim to enhance transparency and compliance within the P2P lending space, citing past violations by some platforms.
Among the new measures, the introduction of a T+1 settlement rule—whereby repayments must be transferred within one day—has emerged as a major point of contention.
“These regulations should have come 3-4 years back. It would have been more helpful and constructive. But better late than never. At least clarity has prevailed,” remarked a senior executive of one of 25 registered NBFC-P2P lending platforms. The executive expressed concern over the T+1 settlement, highlighting the logistical nightmare of processing micro-repayments daily.
Another industry insider, speaking on the condition of anonymity, criticised the rapid implementation timeline.
“Till date, even payment gateways operate at T+3 level. The stock market only recently switched to T+1 after years of preparation. For the P2P segment, the timeline was too tight for reconciliations. How will the additional bandwidth come in? Some logic and consultation behind this should have happened.”
According to the two sources, one of which is a member, the association will request an extension of the timeline to T+2 or T+3 days.
Mukesh Bubna, founder of P2P platform Monexo, also shared concerns about this regulation, noting, He notes that while the RBI's affirmation of existing guidelines is appreciated, the new fund flow requirements could pose challenges.
"The requirement for lender funds not deployed within T+1 to be returned, and for repayments to be directed back to lenders’ personal bank accounts, could disrupt investment flow and reduce opportunities for compounding returns," he said.
"Additionally, the increased operational costs associated with these requirements might challenge the long-term viability of P2P platforms," the founder added.
Players put temporary break on new investments, withdrawals
Several platforms have already begun adjusting their operations.
Mumbai-based IndiaP2P has temporarily halted bulk withdrawals and paused onboarding new customers or investments. "We are limiting bulk withdrawals as per RBI's guidelines issued on August 16. Please be assured that there has been no non-compliance in the past or now. We aim to start withdrawals based on repayments received as early as this coming week," stated the firm in response to customer concerns.
“We are implementing new directives issued by the RBI and are not accepting any new investments or withdrawals in the interim. We will be back with a new improved version shortly,” it added.
Similarly, Cashe-backed 13Karat made a similar announcement on Monday.
“New investment in our 13K and 12K P2P products are temporarily paused, is in lie of RBI master directions regarding P2P, released August 16. We are working with our P2P-NBFC partners, as they make relevant modifications and changes to ensure compliance," the firm's communication to customers read.
The P2P platform, run by Aeries Financial Technologies (Cashe), had partnered with Lendbox and RupeeCircle to manage the funds deposited by the investors.
Meanwhile, many platforms, including LenDenClub and Liquiloans, claim to have been making gradual changes since January as guided by the regulator.
Moneycontrol previously reported that the RBI has been engaging with all licensed platforms, conducting supervisory visits, and issuing corrective measures since last year. Many had already started inculcating changes as guided, including construct of their partnership with consumer-facing apps like Cred, BharatPe, Mobikwik and so on.
"While we appreciate the pragmatic intent behind the circular, we wonder how these changes will impact the broader P2P lending industry and would the P2P lending model remain viable for lenders, borrowers and the platforms," Bubna mentioned.
What happened
The RBI’s August 16 notification has brought significant changes to the rules governing NBFC-P2P lending platforms, aiming to address concerns raised by both regulators and industry observers.
The new guidelines, which took effect immediately, focus on preventing P2P platforms from promoting themselves as investment products with assured returns or liquidity options. The RBI has made it clear that these platforms must not take on any credit risk, provide credit enhancements, or guarantee returns—meaning lenders will now bear the full burden of any defaults.
The new rules also prohibit matching lenders with borrowers within a closed user group, further tightening the operational framework.
As the P2P lending industry grapples with these changes, the future remains uncertain. While the RBI’s intentions to protect consumers and enhance transparency are clear, the stringent nature of the new rules could stifle the growth of these platforms, potentially pushing them toward an existential crisis, industry experts say.
The upcoming meeting between the association and the RBI will be crucial in determining how the industry adapts to these new regulations.
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