August 16th 2024.
In an effort to promote transparency and compliance, the Reserve Bank of India has implemented stricter regulations for Non-Banking Financial Company – Peer to Peer Lending Platforms. These new guidelines, outlined in a revised master direction issued on Friday, aim to improve the practices of these platforms.
One major change is that P2P platforms are no longer allowed to advertise peer-to-peer lending as an investment opportunity with features such as guaranteed minimum returns and liquidity options. Additionally, they are prohibited from cross-selling any insurance products that could be seen as a form of credit enhancement or credit guarantee.
The revised guidelines also state that no loans can be disbursed unless they have been approved by both the lender and borrower, in accordance with the board-approved policy. This measure aims to ensure that all loans are matched and mapped correctly.
It's worth noting that the RBI had already issued guidelines for P2P lending back in 2017. These platforms act as intermediaries, providing an online marketplace for individuals to participate in peer-to-peer lending. However, it has come to the attention of the RBI that some platforms have been engaging in practices that go against the provisions outlined in the Master Direction 2017.
According to the RBI, some of these practices include violating the prescribed funds transfer mechanism, promoting peer-to-peer lending as an investment opportunity with features like guaranteed minimum returns, and even acting as deposit takers and lenders instead of simply being a platform. As a result, the RBI has amended its guidelines and they are now in effect immediately.
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