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RBI-issued regulations for running a P2P Lending Platform

by registrationwala
P2P lending platform

Any registered Non-Banking Finance Company can opt to become a Peer-to-Peer Lending Platform. A Peer-to-Peer lending platform or a P2P license holder company is an online platform where crowdfunding takes place between lenders and borrowers without a broker’s involvement. If you want to register your company as a P2P lending Platform, then you must obtain the necessary NBBC incorporation certification and the P2P lending certificate from the RBI.

In this article, we have detailed to you the guidelines as per the RBI Act of the Peer-to-Peer (P2P) lending License, defining the scope of its activities:

RBI Regulations for P2P Licensees

The RBI has issued the following regulations for P2P license holders in India:

  • A P2P must act as an intermediary to provide an online platform to its participants involved in Peer-to-Peer lending and borrowing.
  • A Peer-to-Peer license holder must adhere to legal requirements applicable to the participants under the relevant RBI laws.
  • An NBFC operator must store as well as process all data relating to its activities and participants on hardware located within the country.

Also Read: Payment Gateway

RBI Restrictions on P2P License holders

  • An NBFC Peer-to-Peer licensee must not raise deposits as defined in the RBI Act. Also, it must not lend credit on its own.
  • A Peer-to-Peer licensee must not provide or arrange any kind of credit enhancement or guarantee to its subscribers.
  • A P2P licensee must not facilitate any secured lending linked to its platform. It must only permit clean loans.
  • A P2P license holder must not hold funds received from lenders and borrowers for servicing loans on its balance sheet.
  • A Peer-to-Peer licensee must not cross-sell any product except for its loan-specific insurance products. Also, it must not permit the international flow of requisite funds.

Undertakings by a P2P License Holder

An RBI P2P licensee must undertake due diligence on its platform participants. It must also undertake credit assessment as well as the risk profiling of the borrowers and disclose the same to its prospective platform lenders.

  • A Peer-to-Peer lending licensee requires the participant’s prior consent to access their information.
  • A P2P license holder must undertake the entire documentation of loan agreements and other related documents.
  • An NBFC Peer-to-Peer licensee must assist in disbursement as well as loan amount repayments. It must also render services to recover loans from the platform.

The P2P licensee must not undertake any activity other than the aforementioned. 

Also Read: Balance Sheet preparation of a Private Limited Company

Operational Guidelines of a Peer-to-Peer Lending Platform

A P2P licensee must have a Board Approved Policy for any of the following purposes:

  • Setting out the eligibility conditions for involved participants
  • Determining the service pricing provided by the platform
  • Setting out the matching lenders’ rules with borrowers in an equitable manner

Outsourcing any activity by a P2P platform must not diminish its obligations as stipulated by the RBI. P2P must also be responsible for its service providers’ objectionable actions, including recovery agents. Also, the RBI holds the P2P accountable for the confidentiality of information on the platform’s participant.

Lastly, the P2P must not disburse a loan. But they can disburse them if the lender has approved the loan recipient. Also, the concerned participants have signed the loan contract.

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