RBI released the final set of guidelines for P2P players. This is extremely welcome move and will bring in credibility to this sector. That augurs well for all the participants, including the NBFCs and the borrowers/ lenders accessing these platforms. We had highlighted earlier in our article (India Fintech P2P Lending: Will Regulation Constrain or Spur Innovation?) the need for the same.
We highlighted key areas for regulation and happy to note that the Reserve Bank has addressed all of the below either completely or at least set the tone for it.
1. Transparency: Refer to the quarterly reporting requirements mandated by RBI.
2. Interest/ APR: RBI has not regulated this but has mandated P2P player boards to set the pricing mechanism for the platform
3. Default/ recovery: Refer to the fair practice code. Also; mandatory data sharing with credit information companies. P2P players also need to announce their grievance mechanism on their website
4. Data Integrity: Refer to the original RBI notification which talks about “disclosures on usage/protection of data & Sec 14 on “Information Technology Framework, Data Security and Business Continuity Plan”
RBI P2P final guideline key points:
1. P2P players will be classified as NBFC-P2P and will need to be registered and obtain CoR (Certificate of Registration) from RBI’s Department of Non-Banking Regulation. Existing players gets a 3-month window to get the registration completed
2. NBFC-P2P will be allowed only as lending platform/ marketplace and won’t be able to take deposits, give loans on its own and not cross sell any product other than loan specific insurance products. Also; only clean loans, no secured loans
3. P2P players cannot provide credit guarantee and will be responsible for credit worthiness evaluation of borrower and providing the same to lender
4. Limits of 10 lakh INR on total exposure of one lender across all such P2P platforms and similarly aggregate loans taken by any borrower across all such P2P platforms at any time.
5. Limit of 50K INR of a single lender to a single borrower in the same platform
6. Limit of 36 months for loan maturity
7. P2P player will need to provide recovery services and assistance in disbursal & repayment
8. Any payment/ fund transfer transactions for loans originated in P2P platform has to happen through escrow accounts and no cash transactions will be allowed (one for fund receive from lender and other for collections)
9. P2P players shall become member of Credit Information Companies (CICs) and will need to submit data, including historical
10. P2P players must maintain transparency and will be required to disclose information to lender on rates, credit worthiness & personal details of borrower, fees, T&C etc. while borrower will have right to information on proposed amount, rate, fees but not contact/ personal details of lenders
11. NBFC P2P players will need to adhere to Fair Practice Code which among others include that they won’t take coercive measures (harassment etc.) for loan recovery
12. The NBFC P2P player board will have the authority to decide on the pricing rules for the loans originated in its platform
13. Reporting requirements to RBI, including:
a. Quarterly submission of a statement which will have:
i. Disbursal in that quarter (Vol & Val)
ii. Closed during the quarter (Vol & Val)
iii. Outstanding at the beginning and at the end of the quarter, including the number of lenders and borrowers outstanding as at the end of the quarter
b. “The amount of funds held in the Escrow Account, bifurcated into funds received from lenders and funds received from borrowers, with credit and debit summations for the quarter”
c. “Number of complaints outstanding at beginning and at end of quarter, and disposed of during the quarter, bifurcated as received from
i. Lenders and
d. The Leverage Ratio, with details of its numerator and denominator. Leverage ratio to be capped at 2 for NBFC P2P players
For complete details, annexure, report formats etc. please refer to the original circular published by RBI