Must Learn Lessons for the p2p lending platform in India


The peer to peer lending service providers have been in business in India since early 2014 but there were no regulations around this industry, until 2017.
In September 2017, the RBI had notified that such platforms will be registered as non-banking financial companies (NBFCs).Appropriate guidelines for p2p lending platforms were released a month later.

There are many websites which are claiming to offer Peer to Peer lending services in India but RBI has published a list of 5 companies which have been registered as P2P lending NBFCs. This list of NBFCs is updated every quarter. The estimated size of the Indian Peer to peer lending market is said to be around Rs. 200 crore.
What we can learn from China's fall out of the peer to peer lending market is that a part of the problem was that of high default rates. When the repayment of the loan, which is in the form of an EMI, is said to be delayed beyond the scheduled date of repayment, then it is said to be a default on the repayment.
If the repayment is due beyond 90 days, this loan account is classified to be as a non-performing asset (NPA). There will be better financial health of a lending portfolio if the rate of defaults is lower. It is advised that the investors should keep a check on the default rates of the platform.
Since there is no standard industry wise data available for peer peer lending in India, the P2P lenders have got a license from the RBI, which is needed to disclose the default numbers on their website. There is a credit bureau membership to be taken as well as credit profile checks of the borrowers so as to report back the performance of the borrowers.
From the Peer to Peer lending industry in China, it can be learned that the trend of the default rates among the Indian P2P lenders would clearly emerge only after the lending cycle post the RBI regulations have been completed, which might take about two years. The current regulation which allows these Peer to Peer NBFCs to lend is for not more than 36 months.
India currently has more than 500 fintech startups under its ambit. The fintech market is undergoing rapid growth and is forecasted to cross $2.4 Billion by 2020, as per reports by NASSCOM and KPMG India. Because of the rising class of UPI, digital wallets and mPoS, another sector which is silently growing is that of peer-to-peer lending in India.
Owing to demonetization, there has been a reduced bank deposit interest rate whereas the real estate market is dwindling and the stock market is always said to be uncertain. It is because of this reason that the investors are keen on exploring Peer to Peer lending as a form of alternate credit instrument.
However, analysts predict that the Indian P2P lending industry is a low risk of investment.

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