RBI tightens guidelines for NBFC P2P lending
bank tightened norms for non-bank lenders operating as peer-to-peer (P2P) lending platforms, barring them from selling insurance products that are in the form of credit enhancement and prohibiting P2P platform from providing any assurance or guarantee on the recovery of loans.
The Reserve Bank of India (RBI) also directed non-banking finance companies (NBFC) to charge a fixed fee, which should not be linked to the borrower's repayment. The regulator also reiterated that the platform cannot provide credit guarantee.
The banking regulator's master direction issued on Friday comes into force with immediate effect. Crowdfunding through the P2P platform connects individual lenders with borrowers to facilitate unsecured loans. There are 26 NBFCs-P2P registered with the RBI as of March 31, 2024.
RBI directed NBFC-P2P not to promote the 'investment product with features like tenure linked assured minimum returns, liquidity options at times acting like deposit takers and lenders instead of being a platform.'
It also said that any loss of principal or interest or both on funds lent by lenders to borrowers on the platform shall be borne by the lenders while adding that the platform cannot provide credit enhancement or credit guarantee.
Further, the platform should obtain a declaration from lenders that he understands that 'there exists a likelihood of loss of entire principal in case of default by a borrower. The P2P platform shall not provide any assurance or guarantee for the recovery of loans.'
The RBI also barred
