P2P Startups Attracting RBI for Regulations


BENGALURU: The potential of online industry in peer-to-peer (P2P) lending has got attention of regulatory bodies like Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI). The unregulated sector for obtaining funding for any business has been covered by RBI in a discussion paper published recently, as reported by Business Insider. The paper focuses on scrutinizing the business models operational in domestic and international levels as per the current regulations. Further, international regulatory practices on crowd funding and P2P lending available in public domain were also examined to get an understanding of the regulatory approaches adopted by different jurisdictions.

It declares the guidelines for the companies under the banner of peer-to-peer lending, and says “to ensure that there is enough skin in the game at a later date, leverage ratio may be prescribed so that the platforms do not expand with indiscriminate leverage." Startups including i-lend, Faircent, LenDenClub and Micrograam credited the paper positively but are seeking clarifications on necessities like direct lending process and leverage ratio. They have time till May 31 to file their feedback and are also waiting for the regulatory bodies to clarify the complexities in the process of transferring money from a lender to a borrower.

The proposed regulatory framework by RBI would encompass the permitted activity, prudential regulations on capital, governance, business continuity plan (BCP) and customer interface, apart from regulatory reporting. Today, there are about 30 startups in India targeting the small-scale entrepreneurs with attractive interest rates. However, they are highly unregulated and now, with the issue of the guidelines, a mere change is expected in this new and rising sector.

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