Parul
The Reserve Bank of India (RBI) on Friday issued a new master direction on Friday to tighten rules for NBFCs on their peer-to-peer lending platforms. The RBI said it has been observed that some of these platforms have adopted certain practices which are violative of its directions. Such practices include, among others, violation of the prescribed funds’ transfer mechanism, promoting peer-to-peer lending as an investment product with features like tenure-linked assured minimum returns, providing liquidity options and at times acting like deposit takers and lenders instead of being a platform.
The new master direction states: “An NBFC-P2P shall not provide or arrange any credit enhancement or credit guarantee. NBFC P2P shall not assume any credit risk, either directly or indirectly, arising out of transactions carried out on its platform. In other words, the entire loss of principal or interest or both, if any, in respect of funds lent by lenders to borrowers on the platform shall be borne by the lenders.”
The RBI has also stated that an NBFC-P2P will not cross-sell any product except for loan-specific insurance products. ”An NBFC-P2P shall be required to disclose the following: publicly disclose portfolio performance including share of non-performing assets (NPAs) on a monthly basis and segregation by age on its website. It may be noted that such disclosures shall also include all losses borne by the lenders on principal or interest or both.”
The P2P platform is also barred from promoting peer-to-peer lending as an investment product with features like tenure-linked assured minimum returns and liquidity options. The master direction further stipulates that the aggregate exposure of a lender to all borrowers at any point of time, across all P2P platforms, shall be subject to a cap of Rs 50 lakh provided that such investments of the lenders on P2P platforms are consistent with their net worth. The lender investing more than Rs 10 lakh across P2P platforms shall produce a certificate to P2P platforms from a practicing Chartered Accountant certifying minimum net-worth of Rs 50 lakh, the RBI said.
The platforms shall not utilise funds of a lender for the replacement of any other lender, the RBI said.
The direction further states that the pricing policy shall be objective and NBFC-P2P shall disclose the fees liable to be charged at the time of lending itself. The fees shall be a fixed amount or a fixed proportion of the principal amount involved in the lending transaction. The fees shall not be dependent upon the repayment by the borrowers.
The practice of matching the participants within a closed user group, whether sourced through an outsourced agency or otherwise, is not permitted. It also lays down that an NBFC-P2P shall explicitly and prominently mention its name (as mentioned in the Certificate of Registration) along with its brand name, if any, in all its touch points/customer interfaces including promotional materials and any communication with stakeholders.
