Mumbai: Peer-to-peer (P2P) lending platforms will gain legitimacy and be able to compete with banks and non-bank lenders when they come under the regulatory ambit of the Reserve Bank of India (RBI), industry experts said on Thursday.
Those most likely to face competition from P2P lending, if it picks up, include small non-banking finance companies (NBFCs) and moneylenders in the business of giving small, unsecured loans for the short-term needs of their customers.
Presently, P2P platforms offer loans that are typically below the minimum amount offered by the formal financing sector. Often, they cater to borrowers who are urgently in need of money and do not have anywhere else to turn to.
As the business picks up, they can potentially offer larger loans.
“We currently provide loans between Rs.50,000 and Rs.2 lakh, which is technically above what a microfinance company provides, but less than banks or NBFCs. Once we have established ourselves over the next two years, we might want to look at larger ticket sizes,” said Bhavin Shah, founder of LenDenClub, a P2P lending platform.
P2P lending is a form of crowdfunding used to raise loans that are paid back with interest. The lending platforms are largely technology companies registered under the Companies Act and acting as an aggregator for lenders and borrowers.
Once the borrowers and lenders register themselves on a P2P website, the operator of the platform carries out due diligence. Those found acceptable are allowed to borrow and lend.