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P2P lenders knock on Finance Minister’s door for easier credit rules

Industry body wants to apprise Nirmala Sitharaman about challenges faced by the budding sector.

, ET Bureau|
Oct 04, 2019, 08.52 AM IST
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As per data shared by startup industry tracker Tracxn, the P2P space has seen only 10 funding rounds so far in 2019, with $1.9 million being pumped in.
BENGALURU: An industry body for peer-to-peer (P2P) lending platforms has asked the government to intervene to relax credit norms for the sector. The Association for NBFC Peer to Peer Lending Platforms has sought a meeting with finance minister Nirmala Sitharaman to explain the sector’s potential and show how regulations have curbed growth.

“The purpose of the meeting will be primarily in reference to the report submitted by the Steering Committee on Fintech on September 2, 2019, and apprise you on the development of the recently regulated peer to peer lending industry,” the association wrote to the finance minister recently. ET has seen a copy of the letter.

The report, among other things, highlighted the steps the government needed to take to help the sector grow, P2P industry insiders said.

“The government’s own committee spoke about relaxation of lending limits, opening opportunities for MUDRA to directly lend to micro enterprises through our platforms among others,” the founder of a P2P startup said on the condition of anonymity. “We want to tell the government about our situation and how we can help in financial inclusion if these new avenues are opened up.”

The initiative is part of multiple other steps by P2P lending startups to get the central bank to increase the limit lenders can put into the P2P space. The association had written to the RBI a couple of months ago.

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Currently, for any individual exposure across platforms the limit is Rs 10 lakh. The industry, however, wants that to be increased to Rs 1 crore for retail investors.

“We have requested for a meeting with FM on this recommendation (review of the restrictions and new funding opportunities) and to further appraise her on the progress of the P2P lending industry and how well this emerging industry could act as a catalyst to meet the credit deficiency, especially in the SME and MSME segment,” Rajiv M. Ranjan, secretary of the association said. “Furthermore, post this meeting, we would expect government’s enhanced focus on this nascent and high potential industry.”

P2P platforms do not process loans themselves, but onboard borrowers looking for credit and match them with lenders who deploy funds through the platform. The space has been active for a few years now, but the RBI regulated it only in 2017. Multiple startups got an NBFC-P2P licence last year.

“Regulations were a shot in the arm, but the limitations became the biggest hindrance for growth,” said a founder of another P2P startup. “While big borrowers like family offices or high net-worth individuals went away because Rs 10 lakh was too low a limit, big institutional investors have also shied away, citing the limit as a constraining factor for growth.”

As per data shared by startup industry tracker Tracxn, the P2P space has seen only 10 funding rounds so far in 2019, with $1.9 million being pumped in. In 2018, $12 million was invested through 22 rounds, it said.

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Prove regulatory hurdles, RBI writes to P2P firms

RBI raises aggregate exposure limit to Rs 50 lakh on P2P lending platforms

P2P lenders mail an SoS to RBI

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