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10 January, 2018
The Reserve Bank of India (“RBI”) issued FAQ’s on January 3, 2018 to the Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017 (“Master Directions”).
The Master Direction mandated that “intermediaries providing the services of loan facilitation via online medium or otherwise”, are required to obtain an NBFC P2P license from the RBI for carrying on the business of P2P Lending within the time frame referenced in the Master Directions. The Master Directions required such ‘NBFC-P2P’ entities to adhere to certain prudential norms including imposing monetary caps on aggregate exposure of a lender to all borrowers at any point in time and the exposure of a single lender to a borrower across all P2P platforms.
Pursuant to discussions with market participants, the difficultly for platforms connecting only regulated entities such as banks and financial institutions with borrowers to comply with these additional prudential norms and compliances were highlighted. The RBI has through the FAQ’s has now clarified that “Electronic Platforms that assist only banks, NBFCs and other regulated AIFIs to identify borrowers are not to be treated as P2P platforms. However, in cases where, apart from banks or NBFCs or AIFIs, other retail lenders use the platform for lending, the platform will have to register separately as an NBFC-P2P”
The RBI also clarified on the issue of whether an existing NBFC can operate as an NBFC-P2P and the RBI has disallowed them from doing so.
The FAQ’s are a welcome clarification from the RBI as platforms which assist regulated financial institutions are not considered as an ‘NBFC- P2P’ and therefore not governed by the provisions of the Master Directions. In our view these clarifications are consistent with the premise in the consultation paper released by the RBI prior to the Master Directions where the objective is to govern unregulated retail lenders or crown funding platforms.
For more information, please contact:
Sameer Sibal, Partner, Jerome Merchant + Partners
sameer.sibal@jmp.law
