RBI to regulate peer-to-peer lending firms

All peer-to-peer lending (P2P) platforms will be regulated by the Reserve Bank of India (RBI), according to a government of India notification released

The gazette notification stated that all the P2P loan platforms will be treated as non-banking financial companies (NBFCs) and will be brought under the ambit of the banking regulator.

The notification is a precursor to the norms that RBI is likely to release for regulation of P2P lending in India.

RBI had argued in favour of regulating P2P lending entities in the consultation paper, stating that the sector has the potential to “disrupt the financial sector and throw up surprises”.

The paper further stated that the importance of an alternative lending channel that P2P loan platforms offer also needs to be acknowledged.

According to RBI, P2P lending is a form of crowdfunding used to raise loans which are paid back with interest.

It can be defined as the use of an online platform that matches lenders with borrowers in order to provide unsecured loans.

The notification will help P2P lenders gain official recognition, opening new avenues for fund-raising and business expansion.

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