From registration to eligibility; This is what P2P lending platform looks like

The Reserve Bank of India (RBI) has released a master directions for peer-to-peer (P2P) lending platform.

P2P lending is a form of crowd-funding 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.

Firstly, business of an NBFC-P2P shall be primarily Information Technology (IT) driven.  No non-banking institution other than a company shall undertake this business.

NBFC-P2P shall commence or carry on P2P business after obtaining a Certificate of Registration (hereinafter referred to as “CoR”) from the Bank.

Every company seeking registration with the Bank as an NBFC-P2P shall have a net owned fund of not less than Rs 2 crore or above as the bank may specify.

Every existing and prospective NBFC-P2P shall make an application for registration to the Department of Non-Banking Regulation, Mumbai of the Bank, in the form which will be specified by the Bank for the purpose. 

Existing NBFC-P2Ps shall apply within three months from the issuance of these Directions.

Validity of the in-principle approval issued by the Bank will last for twelve months from the date of granting such in-principle approval.

Within twelve months period, a NBFC-P2P shall put in place the technology platform, enter into all other legal documentations required and report position of compliance with the terms of grant of in-principle approval to the Bank.

Fund transfer between the participants on P2P platform shall be via escrow account mechanisms which will be operated by a trustee.

At least two escrow accounts, one for funds received from lenders and pending disbursal, and the other for collections from borrowers, shall be maintained.

In regards to grievances, a NBFC-P2P  shall put in place a Board approved policy to address complaints. They should be handled by NBFC-P2P within such time and in such manner as provided for in its Board approved policy, but in any case not beyond a period of one month from the date of receipt.

NBFC-P2P shall maintain a Leverage Ratio not exceeding 2. Aggregate exposure of a lender to all borrowers at any point of time, across all P2Ps, shall be subject to a cap of Rs 10 Lakh.

Similar cap is for aggregate loans taken by a borrower.

Exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000. Meanwhile maturity of the loans shall not exceed 36 months.

P2Ps shall obtain a certificate from the borrower or lender, as applicable, that the limits prescribed above are being adhered to.

RBI said, "An NBFC-P2P shall put in place a Fair Practices Code, based on the Guidelines outlined herein, with the approval of its Board. The same should be put up on its web-site, for the information of various stakeholders."