PEER-TO-PEER (P2P) LENDING AND RBI’S REGULATIONS
DOI:
https://doi.org/10.55662/Abstract
P2P lending is a crowd-funding model which is largely conducted online and acts as a common platform for investors who wish to invest money and act as lenders and for the borrowers who can borrow money. For the lenders it is beneficial as they tend to earn interest on their saving and for the borrowers it is beneficial as they can avail to the loans at a comparatively lower rate of interest. Borrowers are either individuals or small businesses. But unlike a traditional savings account, one can lose money if the borrower defaults. The government now claims that peer-to-peer lending (P2P) platforms would be treated as non-banking financial companies (NBFCs) and regulated by the Reserve Bank of India (RBI). P2P lending platforms are largely tech companies registered under the Companies Act. Once the borrowers and lenders register themselves on the website, due diligence is carried out by the platform and those found acceptable are allowed to participate in lending/borrowing activity. Some platforms provide several additional services like credit assessment, recovery etc. In most cases, the platform moderates the interaction between the borrower and the lender.
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