The Reserve Bank of India (RBI) on Friday tightened norms for Non Banking Financial Company-Peer to Peer (NBFC-P2P) Lending Platforms to improve the transparency and compliance.
“A P2P platform should not promote peer-to-peer lending as an investment product with features like tenure-linked assured minimum returns, liquidity options, etc. and at times acting like deposit takers and lenders instead of being a platform” RBI said.
RBI has specifically mentioned that an NBFC-P2P shall not provide or arrange any credit enhancement or credit guarantee.
“NBFC-P2P shall not assume any credit risk, either directly or indirectly, arising out of transactions carried out on its platform. In other words, entire loss of principal or interest or both, if any, in respect of funds lent by lenders to borrowers on the platform shall be borne by the lenders and adequate disclosures to this effect shall be made to lenders as part of fair practices code,” is said.
An NBFC-P2P shall not cross sell any product except for loan specific insurance products. It may be noted that NBFC-P2P shall not cross sell any insurance product also which is in the nature of credit enhancement or credit guarantee.
The RBI has also imposed a cap on the aggregate exposure of a lender to all borrowers across all P2P platforms, limiting it to ₹50 lakh.
“In case, the amount lent by a lender is more than Rs.10,00,000 across P2P platforms, the lender shall produce a certificate to P2P platforms from a practicing Chartered Accountant certifying minimum net-worth of Rs.50,00,000,” the RBI said.
RBI further said that the NBFC-P2P shall have a Board approved policy in place meant for setting out the rules for matching/ mapping lenders with borrowers in an equitable and non-discriminatory manner.
No loan shall be disbursed unless the lenders and the borrowers have been matched/ mapped as per the board approved policy.
Furthermore, these entities shall be required to obtain explicit declaration from the lender stating that he/she has understood all the risks associated with the lending transactions and that P2P platform does not assure return of principal/payment of interest.