Peer-to-peer lending platforms will now be treated as non-banking financial companies (NBFC). The Reserve Bank of India (RBI) said that: On being satisfied that it is necessary to do so, in exercise of the powers conferred on it by sub-clause (iii) of clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) with the prior approval of the Central Government, hereby, specifies a non-banking institution that carries on ‘the business of a peer to peer lending platform’ to be a Non-Banking Financial Company. RBI has further defined what it means by P2P lending: The term “the business of a peer to peer lending platform” shall mean the business of providing under a contract, the service of loan facilitation, via online medium or otherwise, to the participants who have entered into an arrangement with that platform to lend on it or to avail of loan facilitation services provided by it. However, the notification doesn't mention when a detailed set of rules and regulations for P2P lending platforms will be released. Earlier, in April last year, RBI had brought out a consultation paper to determine if P2P lending platforms should be treated as NBFCs. The banking regulator was looking to regulate the sector with measures including requiring minimum capital of Rs 2 crore or prohibiting them from promising “extraordinary returns.” Interestingly, RBI considers P2P lending as a form of crowd funding used to raise unsecured loans which are paid back with interest. In fact, at the time of issuing the…
