P2P Lending NBFC – Know these 5 important RBI rules
With P2P lending revolutionizing the financing sector in India, sanctioning loans is not just the bank’s job anymore. As more people move towards online borrowing and lending, the Reserve Bank of India (RBI) has regulated the functioning of P2P Lending NBFC. The main features of these include the registration, adequate disclosures, minimum funds required, etc.
Let us take a look at some important points to keep in mind for starting, running or even investing in P2P Lending NBFC in India.
#1 – P2P Lending NBFC Registration
P2P Lending platforms are now officially categorised under Non Bank Financing Companies (P2P Lending NBFC). These companies need to register under the department of Non-Banking Regulation, Mumbai.
This requirement brings a legal eye over these companies without hurting the ‘decentralised’ aspect of them lending money. This helps a lot when it comes to eliminating frauds and catching those defaulting loans. Also, this helps the companies to establish credibility. Since they have the legitimacy of law on their side, they can tap into this as a USP.
#2 – Net Owned Fund Required
Should an organisation want to become a P2P Lending NBFC, it must have a Net Owned Fund (NOF) of ₹2 Crore or above. Basically, a company must have at least NOF of ₹2 Crore with them when they register. But Why?
Well, the RBI is here focusing on the ability of P2P Lending NBFCs to have a good financial standing. Firstly, any new set up requires investments in technology as well as marketing and needs funds to manage intita expenditures. A company would need backup to manage unforeseen expenditures and having NOF requirement would reduce this risk. Secondly, this ensures that a company can handle setbacks in the form of losses, more specifically defaults and unpaid loans, at any stage of its operation.
Hence, it gives a financial stand as well as provides a backup to P2P Lending NBFCs.
#3 – Escrow Accounts
P2P lending platforms are to create and manage two separate escrow accounts —one for the disbursal of funds by lenders, and the other for the money repayments from borrowers. Both these escrow accounts needs to be overseen by bank promoted trustee.
A major advantage of P2P lending is access to speedy loans. Creating two separate accounts would help in faster and transparent transactions as well as smooth functioning. Money from lenders will come into one account for disbursal and money will be collected from borrowers in repayment account. Additionally, since these are escrow accounts, managed by trustee, there’s no chance of syphoning of money by platforms for their own use.
#4 – Lending and Borrowing
A set of regulated rules for a borrower and lender have been circulated by the RBI.
For the borrower
- You can only borrow an aggregated sum of ₹10 lakh at any point of time across all lending platforms.
- You can only borrow an aggregated amount of ₹50,000 from a particular lender at a particular point of time.
For the investor
- You can only invest a total amount of ₹10 lakh at any point in time across all lending platforms.
- You can only lend an aggregated sum of ₹50,000 to a particular borrower at any particular time across all platforms.
The idea here seems to be to limit the exposure lenders have in the early stages of the industry. Similarly, it also seeks to limit abuse of the easy access to funds the the industry provides to the borrowers. That’s not to say borrowers are being cut a bad deal. Companies such as i2i Funding are in fact solving a whole host of borrower loan issues that were previously ignored.
#5 – Submission Of Data
Wouldn’t you feel safe if the company in which you invested your money is held accountable for its operations if it does something wrong with your money? Of course! Well, here is the highest authority for financing in the country helping you out with P2P Lending NBFC. These organisations are required to submit their operational data including lender-borrower transactions, money-in money-out, etc. to the RBI. It is vital to assess the consistency of the company’s regular workings. Otherwise, there could be a one-off traffic that could lead to huge scams if they aren’t watched upon.
Even though the Reserve Bank of India has regulated the industry, it hasn’t deprived it of its decentralised nature. This is ideal for an industry in its early stages. Portals like i2iFunding are already compliant with most of the norms set out by the RBI and applied for CoR of P2P Lending NBFC with RBI. Now, with the highest financing authority of the country safeguarding your investments, why not put your money in established and leading P2P Lending player like i2i Funding!