RBI notifies P2P lending platforms as NBFCs

While the impending regulations governing Peer-to-Peer (P2P) lending platforms are awaited, the Reserve Bank of India (RBI) has notified that such platforms will fall under the ambit of a Non-Banking Financial Company (NBFC)..The gazetted notification further defines what the business of P2P lending is,.“the business of providing under a contract, 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.”.Over the past four years, more than 30 P2P lending platforms have been launched in India, reports BloombergQuint. These platforms essentially act as an intermediary between people in need of funds (borrowers) and people with surplus funds to invest (lenders). 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..Recognising the disruptive nature of this business, the RBI had, in April 2016, released a consultation paper on P2P lending soliciting opinions on the need to regulate, and the risks associated with these platforms..Among other things, the interest rate that is charged to the borrower is question likely to be answered by the RBI as well as the prudential requirements..(Read the notification)