Monday, September 19, 2016

RBI proposes Peer to Peer lending regulations

The Reserve Bank of India (RBI) initiated steps to regulate the nascent and hitherto unregulated
peer-to-peer (P2P) lending business. RBI has proposed registering P2P lending platforms as non-banking financial companies (NBFCs).The banking regulator put out a discussion paper on P2P on its website. Online P2P lending companies work as marketplaces that bring individual borrowers and lenders together for loan transactions without the intervention of traditional financial institutions
such as banks and NBFCs. RBI said it would be "prudent" to regulate the business because of "the
impact it can have on traditional banking channels" and NBFCs and its "potential to disrupt the
financial sector and throw up surprises". In 2015 alone, around 20 new online P2P lending companies were launched in India. At present, there are around 30 start-ups in the P2P lending business in India. The banking regulator sees a role for P2P lending, as evident in its paper, and its language seems to suggest the kind of light touch people prefer when a regulator sets out to define the rules for an emerging business.

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