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RBI to bring P2P lenders under NBFC norms

RBI_LOGO_jpg_2388559fIn a move that could bring P2P lenders under its regulatory purview, the Reserve Bank of India has proposed to classify P2P lending entities as non-banking finance companies. If the sector is left unregulated altogether, there is the risk of unhealthy practices being adopted by one or more players, which may have deleterious consequences, RBI said in a consolidation paper on P2P lending. A P2P company could be registered only as an intermediary, which means the role of the platform would be limited to bringing the borrower and lender together without the lending and borrowing getting reflected on its balance sheet, it said. The platforms will be prohibited from giving any assured return either directly or indirectly. They will be allowed to opine on the suitability of a lender and creditworthiness of a borrower.

It will also be mandated that funds will have to necessarily move directly from the lender’s bank account to the borrower’s bank account to obviate the threat of money laundering, RBI said. The guidelines would also prohibit the platforms being used for any cross-border transaction in view of FEMA provisions relating to transactions between residents and non-residents. Currently there are around 30 companies in the country which currently operate P2P lending platforms but they are doing so without any regulatory oversight.

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