If you are looking to borrow on the peer-to-peer (P2P) platform or want to invest your money on such platforms to earn a higher rate of return, there is good news for you. The Reserve Bank of India (RBI) will soon increase the borrowing and lending limits for the users of the P2P platform. The measure will not only help investors to diversify risk but also help borrowers to get the required sum of money.
Earlier on October 4, 2017, the Reserve Bank of India (RBI) had earlier issued directions for Non-Banking Financial Company-Peer to Peer Lending platform (NBFC-P2P). Since then, the aggregate limits for both borrowers and lenders across all P2P platforms stand at Rs 10 lakh and the maximum exposure of a single borrower is capped at Rs 50,000 across all P2P platforms. These caps help in managing the risks of a single lender.
RBI in its recent Statement on Developmental and Regulatory Policies has stated that in order to give the next push to the lending platforms, the aggregate exposure of a lender to all borrowers at any point of time, across all P2P platforms, will be subject to a cap of Rs 50 lakh.
Further, it is also proposed to do away with the current requirement of escrow accounts to be operated by bank promoted trustee for transfer of funds having to be necessarily opened with the concerned bank. This will help provide more flexibility in operations. Necessary instructions in this regard will be issued shortly.
Investors on P2P platform need to be aware of the risks involved in peer-to-peer lending. It is always suggested to diversify across borrowers and lend a small amount in order to manage risks. Those who have no credit profile or credit score may use P2P platforms to establish a good repayment record and thus create a credit profile for future borrowings. And, if you have a not-so-good credit score, borrowing from P2P platforms is certainly an option. Individuals who borrow on P2P platforms need to be sure about repayment as any default will impact their credit profile in the long run.