And they're out! P2P lending is now a regulated activity in India.
1) The guidelines clarify that P2P is restricted to activities between individuals, providing relief to hybrid models who also work with banks and NBFCs,. However, credit enhancements are prohibited, and while this is sensible for individuals, clarity is awaited on whether this applies only to individuals or is a blanket ban - which would cause challenges to many P2P - bank / NBFC partnerships.
2) Curiously, a leverage ratio is prescribed, though the NBFC P2P may not lend itself.
3)Negatively, cross selling has been tightly proscribed and investments into these lenders will come under the approval route, for all practical purposes
4) The requirement of onshore servers also a challenge for the cloud-born tech sector, but should be addressable.
5) The guidelines have little to say on P2P lenders focusing on SMEs, where the 10 lakh cap and other prescriptions may be challenging
6) Tenor restrictions, while prudent, would exclude interesting and useful asset classes like co-mortgage lending
7) Predictably, ESCROWS for all fund flows - will raise the costs for P2P NBFCs
8) All P2P to apply to RBI within 3 months, and may continue business in the meantime
Orginally published by Vivek Pillai, Associate Director at InnoVen Capital India Pvt. Ltd.
