The Reserve Bank of India (RBI) on Wednesday issued guidelines for all non-banking financial company-peer-to-peer (NBFC-P2P) lenders, specifying eligibility criteria for such companies and prudential norms they will be required to follow, among others.
In a notification on its website, the central bank said that no NBFC-P2P shall commence or carry on the business of a peer to peer-lending platform without obtaining a certificate of registration (CoR) from it. Existing NBFC-P2Ps will have to apply for CoRs within three months.
To be eligible as an NBFC-P2P, a company must have a net owned fund of not less than Rs 2 crore.
NBFC-P2Ps will not be entitled to raise deposits or lend on their own. They will also not be allowed to provide or arrange any credit enhancement or credit guarantee to borrowers. Secured lending linked to such platforms is also prohibited. Apart from undertaking credit assessment of borrowers and notifying lenders about it, NBFC-P2Ps will have to “render services for recovery of loans originated on the platform”, RBI said.
P2P lenders will have to maintain a leverage ratio not exceeding 2. The aggregate exposure of a lender to all borrowers at any point of time, across all P2Ps, shall be subject to a cap of `10 lakh. The same cap will apply to the aggregate loans taken by a borrower under the same conditions. The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000. The maturity of loans will be limited to 36 months.
Fund transfer between the participants on P2P lending platforms shall be through escrow account mechanisms operated by a trustee. “At least two escrow accounts, one for funds received from lenders and pending disbursal, and the other for collections from borrowers, shall be maintained,” the notification said. The trustee must be promoted by the bank maintaining the escrow accounts.
All fund transfers shall be through and from bank accounts and cash transactions will be prohibited.
Lenders on such platforms must be given details about the borrowers, including personal identity, required amount, interest rate sought and credit score as arrived by the NBFC-P2P, as well as details about all the terms and conditions of the loan, including likely return, fees and taxes. Borrowers must be given details about the lenders, including proposed amount, interest rate offered, but excluding personal identity and contact details.
The P2P lender must also publicly disclose on its website an overview of credit assessment, score methodology and factors considered, disclosures on usage and protection of data, a grievance-redressal mechanism, portfolio performance, including share of non-performing assets on a monthly basis and segregation by age, and its broad business model.
The NBFC-P2P will have to disclose to the RBI on a quarterly basis the number of loans disbursed and closed, and the outstanding at the beginning and the end of the quarter, including the number of lenders and borrowers outstanding, as at the end of the quarter.
Other reporting requirements include the amount of funds held in the escrow account, bifurcated into funds received from lenders and funds received from borrowers, with credit and debit summations for the quarter, the number of complaints outstanding at the beginning and end of each quarter and the number of complaints disposed of during the quarter, bifurcated as received from lenders and borrowers. The leverage ratio, with details of its numerator and denominator, must also be