NEW DELHI: The rapidly expanding peer-to-peer lending sector has gained some official recognition, with the government of India notifying that the sector will henceforth come under the ambit of the Reserve Bank of India (RBI) and will be regulated as non-banking financial companies (NBFC).
The notification is a step forward for the P2P lending industry, which has been demanding proper recognition and regulation to incentivise growth. Following the notification, Rajat Gandhi founder & CEO, Faircent.com, a P2P lending platform, said that online P2P lending will drive growth for the fintech sector.
“It will help achieve the government’s dream of facilitating financial inclusion, greater credit access for SMEs and micro SMEs, which hitherto were either denied access or were under-served by the traditional financial institutions. Moreover, it would broaden avenues for lenders,” Gandhi added.
A government of India notification released on Wednesday stated, “The RBI on being satisfied that it is necessary to do so, in exercise of the powers conferred on it by the Reserve Bank of India Act 1934, (2 of 1934) with prior approval from the government, hereby specifies, a non-banking institution that carries on the business of a peer to peer lending platform to be a NBFC.”
The notification is only a precursor to actual guidelines that the RBI is soon to release, as RBI’s ED Sudarshan Sen had earlier said the regulator is waiting for a gazette notification from the government to place these peer-to-peer platforms under its ambit.
P2P lending
Peer-to-peer lending, or P2P, is the practice of lending money to individuals or businesses through services that match lenders with borrowers