MUMBAI: The Reserve Bank of India (RBI) tightened regulations for Non-Banking Financial Company-Peer to Peer Lending Platforms (NBFC-P2P Lending Platforms) on Friday to enhance transparency and ensure compliance.
According to the revised master directions issued by the RBI, P2P platforms are prohibited from promoting peer-to-peer lending as an investment product with features such as tenure-linked assured minimum returns or liquidity options.
Additionally, NBFC-P2P Lending Platforms are barred from cross-selling any insurance products that function as credit enhancement or credit guarantees.
Loan disbursal
The RBI also mandated that no loan should be disbursed unless the lenders and borrowers have been matched or mapped according to a board-approved policy.
The central bank first issued guidelines for P2P lending in 2017, defining these platforms as intermediaries that provide an online marketplace for participants in peer-to-peer lending.
However, the RBI observed that some platforms have engaged in practices that violate the provisions of the 2017 Master Direction.
These violations include breaches of the prescribed funds transfer mechanism, promoting P2P lending as an investment product with guaranteed returns, offering liquidity options, and at times, functioning as deposit takers and lenders rather than as platforms.
In response to these violations, the RBI has introduced amended guidelines, which take effect immediately.
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