P2P lending startups to get NBFC tag soon
RBI identifies peer-to-peer lending startups as a special category of non-banking fin companies
In a gazette notification issued by the central government, the Reserve Bank of India (RBI) said that on being satisfied by the necessity the central bank has identified peer-to-peer lending startups as a special category of non-banking finance companies (NBFCs) and will be regulated by the banking regulator. This notification paves the way for the release of the final guidelines from the RBI on P2P lending and licence the entities who are managing the platforms to enable such transactions.
"The notification proves that the RBI is the final regulatory authority for the P2P lenders which builds a lot of credibility for the young players in this space," said Shankar Vaddadi, founder of i-lend, a Hyderabad-based P2P startup. "This move would also help us access organised venture capital funding which is necessary for scaling up."
In a public statement last week Sudarshan Sen, executive director, RBI had said that the regulator was awaiting the gazette notification from the central government for the final guidelines to be released. Now with the notification being out, the RBI could release regulations anytime. Besides helping the startups engaged in this business raise organised funding, the announcement also recognises the fact that P2P lending platforms can play a vital role in bridging the financial needs of the economy.
"It will help achieve the government's dream of facilitating financial inclusion through greater credit access for small and micro enterprises, which till now were either denied access or were under-served by the traditional financial institutions," said Rajat Gandhi, cofounder of Faircent, a Delhi-based peer-to-peer player.
Peer-to-peer lending platforms are online technology based players who connect lenders with borrowers. With their algorithms and decision making abilities they help lenders take a call on the credit worthiness of the borrowers and also enable quick disbursal of loans at reasonable interest rates.
The RBI had issued draft guidelines for P2P lending platforms in April last year when Raghuram Rajan was the governor of the central bank.