P2P players blame lending limit for rising costs
Peer-to-peer lending (P2P) platforms have seen a rise in traffic and investor interest after registering themselves with the RBI. But they argue the ~1-million limit placed on lenders across all platforms is restrictive.
“With time, these limits are going to be relaxed by the RBI. These have been imposed in order to avoid rapid growth that could lead to systemic risk,” said Ekmeet Singh, CEO, Lendbox.
Industry players want the RBI to raise the limit for individual borrowers and remove the limit for institutional lenders.
OMLP2P has witnessed a rise in its costs and turnaround time after the new rules were brought into effect. “We are absorbing most of the costs, this will not be the case for long,” said Surendra Kumar Jalan, founder and CEO, OMLP2P.
“The benefit of the platform is its low cost of operations. With the restrictions, the cost of acquisition of a lender will increase multifold. That will increase the cost of borrowing,” said Pramod Kumar Akhramka, founder and joint MD, OMLP2P.
Access to funds would be the biggest challenge, said Senthil Natarajan co-founder and CEO, OpenTap. He said P2P firms were being forced to find more lenders. LenDenClub CEO Bhavin Patel said 4-5 per cent of its lenders were above the ~1million bracket but platforms would find it difficult to raise money from existing lenders.
Lendbox has seen a dip in interest from high net worth investors, family offices and investment houses. However, the regulations have lead to a surge in users, including firsttimers. “The RBI recognition is the biggest positive impact. Data gathering and reporting requirements also positively impact the industry,” said Natarajan.
i2ifunding saw its monthly traffic rise by 20 per cent after the guidelines were imposed and a significant jump in lender registration. However, the platform saw no change in traction from borrowers. LenDenClub reported a 25-30 per cent rise in user registration and improvement of the completion ratio.
“After demonetisation, there has been a surge in demand. It is, however, too soon to gauge how much of this is due to the RBI guidelines,” said Natarajan.
“We have received multiple queries from venture capital firms and angel funds that are now considering this sector as a prospective investment option. We are expecting a bigger round of investment from institutional investors,” said Raghavendra Pratap Singh, co-founder, i2ifunding.