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The RBI has directed peer to peer (P2P) lending platforms not to promote their product as an investment product.
In the recent circular, RBI said, “The P2P platform shall not provide any assurance or guarantee for the recovery of loans. Further, the P2P platform shall not promote peer-to-peer lending as an investment product with features like tenure linked assured minimum returns, liquidity options, etc.”
The banking regulator said that the P2P platforms should not cross sell any product except for loan specific insurance products.
The RBI has found that P2P lending platforms violated regulations. The RBI said, “It has been observed that some of these platforms have adopted certain practices, which are violative of the said directions. Such practices include, among others, violation of the prescribed funds transfer mechanism, promoting peer to peer lending as an investment product with features like tenure linked assured minimum returns, providing liquidity options and at times acting like deposit takers and lenders instead of being a platform.”
Here are other key highlights of the new regulations on P2P lending platforms:
- P2P cannot provide or arrange any credit enhancement or credit guarantee
- No loan should be disbursed unless the lenders and borrowers have been matched/ mapped as per board approved policy frame. It added that individual lender should have approved the individual recipient and all the parties must have their signatures on the loan contract
- Such platforms should have a board approved policy in place and set out the rules for mapping lenders with borrowers in an equitable and non-discriminatory manner
- The funds transferred into the lenders’ escrow account and borrowers’ escrow account should not remain in these escrow accounts for a period exceeding ‘T+1’ day, where ‘T’ is the date on which the funds are received in these escrow accounts
- The platforms should disclose the following to the lender (a) details about the borrower including personal identity with his/ her consent (which should be kept on record), required amount, interest rate sought and credit score as arrived by the NBFC-P2P
- The platforms should disclose the portfolio performance including share of non-performing assets on a monthly basis and segregation by age; and it should also include all losses borne by the lenders on principal or interest or both