Nbfc P2p Lending Registration

P2P Lending stands for Peer-to-Peer lending. The term “Peer to Peer Lending Platform” means an intermediary providing the services of loan facilitation via online medium or otherwise, to the participants. Participant means a person who has entered into an arrangement with an NBFC-P2P to lend on it or to avail of loan facilitation services provided by it. NBFC P2P Platform is a Non-Banking Financial Company providing services of loan facilitation to interested individuals or businesses through online portals. An individual or financial institution can become a lender at P2P lending and earn interest paid by the individual or business who has borrowed money. P2P Lending operates completely online and serves to connect such lenders and borrowers. An individual who is interested to invest his money somewhere else lends the same (lender) to the individual who is in need of money(borrower) through P2P Lending Platform.

EMERGENCE OF PEER TO PEER LENDING:

A result of the greater shift towards digitalization of transactions is, the peer-to-peer lending sector has started growing in India. This sector has been brought under the regulatory framework of the Reserve Bank of India (“RBI”) under the wing of NBFCs. The digitally backed NBFCs are assessing the borrowers’ creditworthiness online and delivering almost instant credit with little or no paperwork, transparency in their offerings and great customer service which is a significant upgrade from the earlier experience.  

ELIGIBILITY CRITERIA FOR BECOMING AN NBFC P2P:

  •  Company: Company registered under Companies Act 2013 or Companies Act 1956 can carry on the business of Peer to Peer Lending Platform.
  • Prior Certificate of Registration: Prior Certificate of Registration (hereinafter referred to as “CoR”) from the Bank is required for commencement of business of Peer to Peer Lending Platform.
  • Net Owned Fund of Rs. 2 crores: Every company seeking registration with the Bank as an NBFC-P2P shall have a net owned fund of minimum Rs 2 crores or such higher amount as the Bank may specify

DETAILS REQUIRED TO BE SUBMITTED:

  1. the details of the software/ hardware proposed to be set up by the applicant
  2. Road map giving the timeline by which the IT infrastructure can be set up.
  • Brief of the business model to be adopted
  1. Proposed process for participant authentication
  2. The procedure to be adopted for documentation of loan agreements.

 

 

* SCALE BASED REGULATION(SBR); A Revised Regulatory Framework for NBFCs:

To tighten strict control over NBFCs, RBI has prescribed Guidelines on Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs on 22nd October 2021 which will be effective from 01st October,2022. NBFCs shall be categorized into Four Layer Approach i.e Base Layer, Middle Layer, Upper Layer and Top Layer. NBFC-Peer to Peer Lending Platform (NBFC-P2P) shall be covered under the “Base Layer” Category. RBI has also brought changes in regulatory Net Owned Fund for NBFC-ICC, NBFC-MFI and NBFC-Factors which shall be increased to Rs 10 Crores. But for NBFC-P2P, NBFC-AA, and NBFCs with no public funds and no customer interface, the NOF shall continue to be ?2 crore.

PROCEDURE FOR REGISTRATION

Sr. No.

PARTICULARS

PROCEDURE

 

 

 

1.                   

APPLICATION

An application is required to be made by the Company for registration as NBFC P2P to the Department of Regulation, Mumbai of the Reserve Bank of India in the form as may be specified.

 

 

 

2.

CONDITIONS TO BE FULFILLED FOR THE PURPOSE OF CONSIDERING APPLICATION FOR REGISTRATION

a.       The Company must be incorporated in India;

b.      The Company must have necessary technological, entrepreneurial and managerial resources for offering services to the users of Peer-to-Peer Lending Platform;

c.       The company must have adequate capital structure to carry on the business of Peer-to-Peer Lending Platform;

d.      The Promoters and the Directors of the company are fit and proper;

e.       General character of the management of the Company must not be prejudicial to the public interest;

f.        The Company must submit a plan or implement a robust and secure Information Technology system;

g.       The Company must submit a viable business plan for undertaking the business of Peer-to-Peer Lending Platform;

h.      Public Interest must be served by the grant of Certificate of Registration;

i.        Such other conditions as may be specified by the Bank

 

 

 

3.

IN PRINCIPLE APPROVAL:

        i.            After fulfillment of the following conditions, Bank may grant in-principal   approval for setting up of a Peer-to-Peer Lending Platform, subject to such conditions which it may consider fit to impose.

      ii.            The validity of the in-principal approval shall be 12 months from the date of granting such in-principal approval.

    iii.            The company shall put in place the technology platform, enter into all other legal documentations required and report position of compliance with the terms of grant of in-principal approval to the Bank within the period of twelve months.

    iv.            The Bank, after being satisfied that the entity is ready to commence operations, grant a Certificate of Registration as NBFC-P2P, subject to such conditions as it may deem fit by the Bank.

 

 SCOPE OF ACTIVITIES:

  1. NBFC P2P shall act as an intermediary providing an online marketplace or platform to the participants involved in Peer-to-Peer Lending;
  2. It shall not accept deposits as defined under the RBI Act or under the Companies Act;
  • It shall not carry on the business of lending on its own;
  1. It shall not arrange or provide Credit enhancement or credit guarantee;
  2. It shall not allow secured lending on its platform;
  3. Its Balance Sheet shall not contain funds received from lenders for lending, or funds received from borrowers for servicing loans or fund transfer between the participants on the Peer-to-peer lending platform;
  • It shall not cross sell any product except for loan specific insurance products;
  • International flow of funds is not permitted;
  1. It shall ensure adherence to legal requirements applicable to the participants as prescribed under relevant laws.
  2. It shall store and process all data relating to its activities and participants on hardware located within India.
  3. It shall carry Due Diligence of all participants
  • It shall undertake credit assessment and risk profiling of the borrowers and disclose the same to their prospective lenders;
  • It shall obtain prior consent of the participants to access its credit information;
  • Undertake documentation of loan agreements and other related documents;
  1. Provide assistance in disbursement and repayment of Loan Amount;
  • render services for recovery of loans originated on the platform.    
  • It shall not undertake any activity other than mentioned above. It can deploy investible funds in instruments specified by the Bank but not for the purpose of trading.

PRUDENTIAL NORMS:

  1. NBFC-P2P shall maintain a Leverage Ratio (Total Outside Liabilities divided by Owned Funds, of the NBFC-P2P) not exceeding 2.
  2. 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 ?50,00,000/- provided that such investments of the lenders on P2P platforms are consistent with their net-worth. The lender investing more than ?10,00,000 across P2P platforms shall produce a certificate to P2P platforms from a practicing Chartered Accountant certifying minimum net-worth of ?50,00,000.
  3. The aggregate loans taken by a borrower at any point of time, across all P2Ps, shall be subject to a cap of ? 10,00,000/-
  4. The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed ? 50,000/-.
  5. The maturity of the loans shall not exceed 36 months.
  6. P2Ps shall obtain a certificate from the borrower or lender, as applicable, that the limits prescribed above are being adhered to.

DISCLOSURE REQUIREMENTS:

Sr. No.

PARTICULARS

DISCLOSURE REQUIREMENTS

 

 

 

1.

DISCLOSURE TO LENDERS

a.       details about the borrower/s including personal identity, required amount, interest rate sought and credit score as arrived by the NBFC-P2P.

b.      details about all the terms and conditions of the loan, including likely return, fees and taxes;

 

2.

DISCLOSURE TO BORROWERS

a.                   details about the lender/s including proposed amount, interest rate offered but excluding personal identity and contact details;

3.

DISCLOSURE ON WEBSITE TO GENERAL PUBLIC

a.       Broad Business Model

b.      Overview of Credit Assessment

c.       Disclosure on usage and protection of data

d.      portfolio performance including share of non-performing assets on a monthly basis and segregation by age

e.       Grievance redressal Mechanism

4.

OTHER DISCLOSURES

a.       NBFC-P2P shall ensure that the providing of services to a participant, who has applied for availing of such services, is backed by appropriate agreements between the participants and the NBFC-P2P. The agreements shall categorically specify all the terms and conditions among the borrower, the lender and the NBFC-P2P.

b.      The interest rates displayed on the platform shall be in Annualized Percentage Rate (APR) format.

REASONS OF GROWING OPPORTUNITY OF P2P NBFC IN FLOURISHING INDIAN MARKET:

  1. Make Loan procedure easy
  2. Lower Cost of Borrowing
  3. Easy Funding to Micro and Small Sized Enterprises
  4. Less Paperwork
  5. Direct Negotiation between Lender and Borrower

   REPORTING REQUIREMENTS:

1) The Bank may, from time to time, prescribe return/s to be submitted by NBFC-P2P, as it deems fit.

(2) The following quarterly statements shall be submitted to the aforesaid Regional Office within 15 days after the quarter to which these relate.

(i) A statement, showing the number and amount in respect of loans;

  1. disbursed during the quarter;
  2. closed during the quarter; and
  3. outstanding at the beginning and at the end of the quarter, including the number of lenders and borrowers outstanding as at the end of the quarter

(ii) The amount of funds held in the Escrow Account, bifurcated into funds received from lenders and funds received from borrowers, with credit and debit summations for the quarter.

(iii) Number of complaints outstanding at beginning and at end of quarter, and disposed of during the quarter, bifurcated as received from

  1. lenders and
  2. borrowers.

(iv) The Leverage Ratio, with details of its numerator and denominator.

CANCELLATION OF CERTIFICATE OF REGISTRATION:

The Bank may cancel the CoR granted to an NBFC-P2P, if such company –

  1. ceases to carry on the business of Peer-to-Peer Lending Platform in India; or
  2. has failed to comply with any condition subject to which the CoR has been issued to it; or
  3. is no longer eligible to hold the CoR; or
  4. at any time fails to fulfill any of the conditions referred to in paragraphs 5(2)(ii) and 5(2)(v); or

fails to –
(i) comply with any Direction issued by the Bank; or
(ii) maintain accounts, publish and disclose its financial position in accordance with the requirements of any law or any Direction or order issued by the Bank; or
(iii) submit or offer for inspection its books of account or other relevant documents when so demanded by the Bank

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Frequently Asked Questions

For the purposes of para 4(iv) of the Directions, the term ’person’ shall include an individual, a body of individuals, a HUF, a firm, a society or any artificial body, whether incorporated or not.

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

Leverage ratio refers to outside liabilities on the balance sheet of an NBFC-P2P Platform that it can raise divided by its owned funds. Customers’ funds lent/borrowed by using the platform is not reckoned as outside liability of the platform

Investible funds refer to capital infused in the business and surplus generated out of business of NBFC-P2P. It does not include funds of lenders and borrowers that flow through the escrow accounts. Customers’ funds lent/borrowed by using the platform cannot be utilised by the platform.

The applicant should give the list of promoters and the source of funds for the minimum capital of Rs 2 crore. The capital should be infused before issue of CoR. No change in promoters will be allowed in the interregnum.

No.

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