Entrepreneurs sometimes need money to run or promote their business. For this they have to take loan from individuals or any lending agencies. In the market there are some non-banking financial companies (NBFCs) as well which offer to help such entrepreneurs by proving loan. To facilitate such entrepreneurs, Government has decided to create online P2P platforms so that willing investors might invest money into coming up enterprises and to assist the people who need to borrow on interest. For this, on October, 2017 Reserve Bank of India (RBI) issued direction aimed at regulating such lendings and borrowings. These directions will be styled as the Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directives 2017 that have come into force with immediate effect. It will cover both existing as well as prospective NBFC P2Ps. Such P2P can be called can online forum that matches lenders with borrowers.
Basic Details about P2P
The salient part of these directions is that now onwards all NBFCs will have to obtain a Certificate of Registration to start or carry on such business. Another important directive is that an NBFC – P2P shall have a minimum net fund of Rs. 20 million (2 crore) to operate lending business. The NBFCs already in the market have been asked to get registered within 3 months. The loan provided shall not exceed Rs. 10 lakh. In so far as the interest rate is concerned it shall be fixed by the P2P platform or based on mutual agreement between the borrowing and lending parties themselves.
How P2P works?
If you wish to take a loan through a P2P lending portal then the first thing you need to do is to just register yourself as a borrower. In some web-portals which provide P2P facility, there is an automated system which suggests the loan period, loan amount and interest rate against your profile, which indicates your capability to efficiently repay the loan. They will ask you to fill up a form where you will have to mention there about the purpose for which you want to take the loan and why lenders should give loan to you. You will have to disclose your financial status, educational qualification etc. All the info given by you will help the lenders to know more about you, and in case if they are interested to give you loan, they will start verifying your details submitted by you and then they may approach you. It is possible that many lenders may get interested to provide you loan. In that case, you will have an opportunity to compare their offers and to make a choice.
About Loan Capping and Interest Involved
According to the RBI guidelines, under the P2P system a borrower can borrow from more than one lenders. But, as already mentioned above, the total borrowing shall not exceed Rs. 10 lakh. Exposure of a single lender to same borrower is capped at Rs. 50,000. The tenure of the loan should not exceed 36 months.