P2P lenders seek clarity from central bank on appointment of trustees for fund transfer
MUMBAI: Peer-to-peer lending (P2P) platforms in India have requested the Reserve Bank of India (RBI) to allow non-bank trust companies to act as trustees for fund transfers between the participants—investors and borrowers—on their platforms.
P2P lending entails lending money to individuals or businesses through online services that match lenders with borrowers. RBI guidelines released on October 4 require a P2P platform to have at least two escrow accounts for fund transfer, to be operated by a trustee promoted by the bank that maintains these accounts.
“At least two escrow accounts, one for funds received from lenders and pending disbursal, and the other for collections from borrowers, shall be maintained. The trustee shall mandatorily be promoted by the bank maintaining the escrow accounts,” the RBI notification said. According to P2P lenders, most banks are not keen on offering escrow services to P2P platforms as volumes are low and ticket sizes are small.
“It took us six months to get a trustee. Most of the bank promoted trustees were unwilling to come on board as the industry is nascent,” said Mukesh Bubna, founder and chief executive at Monexo Innovations Ltd, a Mumbai-based P2P platform.
Also, a majority of such trustee firms have been promoted by public sector banks, which will also mean shifting of escrow accounts to public sector banks.
Bubna said P2P platforms require fast disbursal of funds and private banks are prompter and more digitally sound for such transactions.
There are just two trust com- panies that have been promoted by private banks.
“We have a limited choice now. Shifting the escrow accounts to a public sector bank will not be very efficient,” Bubna said.
India has about 15 P2P firms, of which many are yet to appoint a trustee. In such a scenario, P2P platforms may either have to transfer their existing escrow accounts to a bank that has promoted a trust company, or reach out to the limited number of trustees available.
So far, the companies have informally reached out to the regulator, said two people close to the development, requesting anonymity. They are expected to send formal feedback to the regulator soon.
They also said P2P firms will wait for the RBI to make clarifications before applying for a certificate of registration. Existing non-banking financial company (NBFC)-P2Ps shall apply within three months from the issuance of these directions.