The peer to peer
lending service providers have been in business in India since early 2014 but
there were no regulations around this industry, until
2017.
In September 2017, the
RBI had notified that such platforms will be registered as non-banking
financial companies (NBFCs).Appropriate guidelines for p2p lending platforms were
released a month later.
There are many websites
which are claiming to offer Peer to Peer lending services in India but RBI has
published a list of 5 companies which have been registered as P2P lending
NBFCs. This list of NBFCs is updated every quarter. The estimated size of the Indian
Peer to peer lending market is said to be around Rs. 200 crore.
What we can learn from
China's fall out of the peer to peer lending market is that a part of the problem
was that of high default rates. When the repayment of the loan, which is in the
form of an EMI, is said to be delayed beyond the scheduled date of repayment,
then it is said to be a default on the repayment.
If the repayment is
due beyond 90 days, this loan account is classified to be as a non-performing
asset (NPA). There will be better financial health of a lending portfolio if the
rate of defaults is lower. It is advised that the investors should keep a check
on the default rates of the platform.
Since there is no
standard industry wise data available for peer peer lending in India, the P2P lenders
have got a license from the RBI, which is needed to disclose the default
numbers on their website. There is a credit bureau membership to be taken as
well as credit profile checks of the borrowers so as to report back the
performance of the borrowers.
From the Peer to Peer
lending industry in China, it can be learned that the trend of the default
rates among the Indian P2P lenders would clearly emerge only after the lending
cycle post the RBI regulations have been completed, which might take about two
years. The current regulation which allows these Peer to Peer NBFCs to lend is for
not more than 36 months.
India currently has
more than 500 fintech startups under its ambit. The fintech market is
undergoing rapid growth and is forecasted to cross $2.4 Billion by 2020, as per
reports by NASSCOM and KPMG India. Because of the rising class of UPI, digital
wallets and mPoS, another sector which is silently growing is that of
peer-to-peer lending in India.
Owing to
demonetization, there has been a reduced bank deposit interest rate whereas the
real estate market is dwindling and the stock market is always said to be
uncertain. It is because of this reason that the investors are keen on
exploring Peer to Peer lending as a form of alternate credit instrument.
However, analysts
predict that the Indian P2P lending industry is a low risk of investment.