While the Reserve Bank of India’s (RBI) guidelines for lenders and borrowers on peer to peer (P2P) lending platforms are important cautionary moves, caps on lending should ideally be linked to lenders’ incomes, Neha Agarwal, co-founder of i2ifunding, told Shritama Bose. The company has disbursed more than Rs 3 crore so far in FY18 and has a full-year target of Rs 10 crore, she added. Edited excerpts:
How has business been for you in FY18?
After demonetisation we have been observing significant growth. In FY18, we are doing around 200% more than what we were doing last year. So far in FY18, we have disbursed more than Rs 3 crore with a current run rate of about Rs 70 lakh per month. In all, we have disbursed more than Rs 7 crore since launch.
How many active lenders and borrowers are there on your platform at the moment?
We have had more than 30,000 registrations on our platform so far, of which around 25,000 people are registered as borrowers and around 5,000 as lenders. Since launch, around 500 loans have been disbursed and we have around 2,000 active lenders.
What is the average ticket size of loans disbursed through your platform?
The average loan size is about Rs 1.5 lakh. We typically focus on small loans so as to reach borrowers who are unable to get loans from formal financial sources.
How much do you charge lenders and borrowers?
We have multiple sources of revenue. Broadly, we charge an average of 4-5% of loan amount from the borrower and 1% of loan amount from lenders. This is in addition to a one-time registration fee.
What is the rate of retention of lenders?
Almost 90% of the lenders have invested more than once. Around 40% of lenders are lending regularly on our platform.
What are interest rates like?
Currently, rates range between 12% and 30% per annum.
What are your revenues like and when do you expect to break even?
Breaking even is not a concern for us considering high gross margin. With the current team, we can break even in about six to eight months. However, we are focused on growth and for that we are looking to invest more in technology and marketing. Hence, break-even will take a little more time.
What is your disbursal forecast for the full year?
We are looking to disburse about Rs 10 crore this year.
Some lenders have expressed concern about the limits on lending and borrowing as set down by the Reserve Bank of India (RBI). What is your view?
It seems the RBI has taken a cautionary move and would like to watch how the sector develops. The rationale behind capping the lenders at Rs 10 lakh is to protect retail lenders from taking high exposure. However, we think there should not have been a cap for sophisticated institutional lenders and even for retail lenders, caps should be based on their income. As for capping borrowings, Rs 10 lakh is a fair sum to start with. Once the sector gets established, we think that the limit will be increased.
Will the new guidelines have an impact on interest rates on P2P platforms?
No, interest rates will not be impacted in the near future. RBI has not put any cap on interest rates and ultimately, market forces will determine the interest rates on P2P lending platforms. It is also dependent on the quality of borrowers a platform is targeting. If you want to attract prime borrowers, you cannot have higher interest rates than the other options available in the market. In any case, rates on our platforms are already lower than alternate sources of funding for the borrowers and also lower than majority of the traditional NBFCs (non-banking financial companies).
Are P2P players ready to deal with the function of recovery of loans? To what extent could it increase operating costs for them?
The leading platforms are already doing some sort of recovery on behalf of lenders. RBI guidelines will add legitimacy to recovery assistance being provided by platforms like ours. We are geared up to create a robust and compliant recovery mechanism to assist our lenders. For us, this is not going to lead to increase in costs. However, others who will start recovery operations might need to shell out almost 10-15% of their revenue for it.