CAPPING THE RISKS

In its guidelines for P2P lending institutions – they are now notified as non-banking financial companies (NBFCs) – the Reserve Bank of India (RBI) has not only defined the scope of their activities but has also specified the prudential norms regarding maximum leverage, aggregate and single-participant limits, maximum loan tenure, fund transfer mechanism, grievance redressal system and disclosure requirements, which should address some of the challenges faced globally. Moreover, a P2P platform seeking registration should have a net owned fund of at least `2 crore, an effective step to weed out non-serious players. Here are the RBI regulations that will help cap the risks of P2P participants.

The aggregate exposure of a lender to all borrowers at any point of time, across all P2Ps, shall be subject to a cap of `10 lakh.

Total loans taken by a borrower at any point of time, across all P2Ps, shall not exceed `10 lakh

The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed `50,000

Maturity of loans shall not exceed 36 months

P2Ps shall obtain a certificate from the borrower or lender, as applicable, that the limits prescribed above are being adhered to.