19/09/2024 | 4 Comments

Peer-to-peer (P2P) lending is becoming a popular way for people to borrow and lend money directly without needing a bank. Now that P2P lending is growing exponentially and more people are investing in it, it is important to have clear rules to keep things safe for both borrowers and lenders. The Reserve Bank of India (RBI) has recently introduced new guidelines to regulate P2P lending platforms.

These P2P lending RBI guidelines have been set to improve transparency and make the process smoother. Let’s learn about restrictions on P2P lending, regulations on P2P investments and more.

No More Credit Guarantees

One of the big changes in the new RBI guidelines is that P2P platforms can no longer offer credit guarantees. Earlier, some platforms used to promise to pay back lenders even if a borrower failed to repay. While this gave lenders a sense of security, it also covered up the real risk of lending money. The new rule has been put to make sure the lenders are aware of the actual risks that no P2P platforms can offer any guarantee.

Faster Fund Transfers

The RBI has also made changes to how quickly money can move between lenders and borrowers. P2P platforms are now required to transfer funds through an escrow account within one business day. This means the money must be transferred faster than before. This not only reduces delays but also helps lenders get their money back quickly. This update has certainly made the P2P lending process more efficient.

Limits on Lending Amounts

To make sure lenders do not lend more than they can afford, the RBI has set a maximum limit. Now, individual lenders can lend up to ₹50 lakh across all P2P platforms. If a lender wishes to lend more than ₹10 lakh, they need to provide a net-worth certificate from a Chartered Accountant. This rule is meant to protect lenders from taking on too much risk.

No Cross-Selling of Products

The RBI has also placed limits on what P2P platforms can sell to borrowers. P2P platforms are now only allowed to sell loan-specific insurance products. This new rule is introduced to make P2P platforms focus on lending rather than selling other products.

Monthly Transparency Reports

To keep things transparent, the RBI now has asked the P2P platforms to share their loan performance data including non-performing assets (NPAs), every month. NPAs refer to loans that are not being repaid. These monthly updates would help lenders understand how safe or risky a platform’s loans are.

Also Read : How Safe is It to Invest Money in P2P Lending

Conclusion

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