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NBFC PEER TO PEER  LICENSE (NBFC-P2P)

Reserve bank of India has issued a notification  DNBR.045/CGM(CDS)-2017datedAugust 24, 2017 in terms of sub-clause (iii) of clause (f) of section 45I of the Reserve Bank of India Act, 1934 regarding the business of Peer to peer Lending Platform. The same notification was further updated vide dated November 09, 2017, February 23, 2018, November 22, 2019, December 23, 2019.

WHAT IS PEER TO PEER LANDING PLATFORM?

Peer to Peer Lending Platform” means an intermediary providing the services of loan facilitation via online medium or otherwise, to the 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.

ELIGIBILITY CRITERIA FOR REGISTRATION AS NBFC-P2P

1. It should be a Company registered under the Companies Act, 2013.
2. NBFC-P2P mandatory requires a certificate of registration from RBI.
3. Every NBFC-P2P Company should have net owned fund of 2 crore or such higher amount as the Bank may specify.
4. NBFC-P2P shall maintain a Leverage Ratio not exceeding 2.
5. 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.
6. 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/-.
7.  The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed ` 50,000/-.
8. The maturity of the loans shall not exceed 36 months.
9. P2Ps shall obtain a certificate from the borrower or lender, as applicable, that the limits prescribed above are being adhered to.

PROCESS OF REGISTRATION

1. Every existing and prospective NBFC-P2P shall make an application for registration to the Department of Non-Banking Regulation, Mumbai of the Bank
2. The Bank, for the purpose of considering the application for registration, shall require the following conditions, among others, to be fulfilled:

a)   The company is incorporated in India;

b) The company has the necessary technological, entrepreneurial and managerial resources to offer such services to the participants;

c) The company has an adequate capital structure to undertake the business of Peer to Peer Lending Platform;

d) The promoters and the Directors of the company are fit and proper;

e) The general character of the management of the company is not prejudicial to  the public interest;

f)  The company has submitted a plan for, or implemented, a robust and secure Information Technology system;

g) The company has submitted a viable business plan for conducting the business of Peer to Peer Lending Platform;

h)  Public interest shall be served by the grant of CoR;

i)   Any other condition as may be specified by the Bank, the fulfillment of which, in the opinion of the Bank, is necessary to ensure that the commencement of or carrying on the business in India shall not be prejudicial to the public interest.

SCOPE OF THE NBFC-P2P

(1) An NBFC-P2P shall-

(i) act as an intermediary providing an online marketplace or platform to the participants involved in Peer to Peer lending;

(ii) not raise deposits as defined by or under Section 45I(bb) of the Act or the Companies Act, 2013;

(iii) not lend on its own;

(iv) not provide or arrange any credit enhancement or credit guarantee;

(v) not facilitate or permit any secured lending linked to its platform; i.e. only clean loans will be permitted;

(vi) not hold, on its own balance sheet, funds received from lenders for lending, or funds received from borrowers for servicing loans; or such funds as stipulated in paragraph 9;

(vii) not cross-sell any product except for loan specific insurance products;

(viii) not permit the international flow of funds;

(ix) ensure adherence to legal requirements applicable to the participants as prescribed under relevant laws.

(x) store and process all data relating to its activities and participants on hardware located within India.

(2) Further, NBFC-P2P shall-

(i) undertake due diligence on the participants;

(ii) undertake credit assessment and risk profiling of the borrowers and disclose the same to their prospective lenders;

(iii) require the prior and explicit consent of the participant to access its credit information;

(iv) undertake documentation of loan agreements and other related documents;

(v) provide assistance in disbursement and repayments of the loan amount;

(vi) render services for recovery of loans originated on the platform.