Peer-to-peer lending (P2P) platforms will be treated as non-banking financial companies (NBFCs) and thus regulated by the RBI, the central bank said in a notification. P2P lending is a form of crowd-funding used to raise loans which are paid back with interest. It can be defined as the use of an online platform that matches lenders with borrowers in order to provide unsecured loans. “The Reserve Bank of India…specifies a non-banking institution that carries on ‘the business of a peer to peer lending platform’ to be an NBFC,” the notification said.
As per the RBI, the business of a P2P lending platform mean that the service of loan facilitation, via online medium or otherwise, to “the participants who have entered into an arrangement with that platform to lend on it or to avail of loan facilitation services provided by it”. The RBI had floated a consultation paper in April 2016 on the such lending platforms.
The borrower can either be an individual or a legal person requiring a loan. The interest rate may be set by the platform or mutual agreement between the borrower and the lender.
Fees are paid to the platform by both the lender as well as the borrower. Borrowers pay an origination fee — either a flat rate fee or as a percentage of the loan amount raised — according to their risk category.