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Lending activity will gather pace on peer-to-peer (P2P) platform with the sector getting NBFC status even as the compliance burden on them may eliminate some entities out of the market, industry players say. The Reserve Bank of India last week came out with the guidelines for the peer-to-peer lending marketplace that until so far remained without any regulations and are now categorised as the non-banking finance companies. It is a new era crowdfunded loan raising mechanism driven by technology that matches prospective borrowers and lenders on a single platform via the Internet. "The announcement is also a validation of our business model and best practices. The resolution is an extremely positive step for the P2P lending business," said Rajat Gandhi, founder and CEO, Faircent.com. Another player i2ifunding said with this, borrowing and lending activities will gather pace. "At present, many genuine borrowers don't have access to formal credit facilities due to multiple factors.
The status of NBFC will help P2P lending industry create a niche for itself in the category of unsecured small-ticket loans," said Manisha Bansal, co-founder, i2ifunding. She said her company is doing lot of innovation and automation in entire process of loan origination to loan disbursal and this "shot in arm" will solve many issues the company faced such as getting direct access to credit bureau scores. The status will bring greater stability and credibility and over time bring it at par with other asset classes like market-linked investments such as mutual funds, SIP (systematic investment plans) and stocks, he said. "The development will also help online P2P lending platforms attract higher investments, boost expansion efforts, as well as drive product and tech innovations. All of this will aid in extending the benefits of greater operational efficiency to the end-consumer in a hassle-free manner," Gandhi said. LoanAdda has highlighted the shortcomings of being categorised as NBFCs as the industry had actually wanted separate guidelines as a whole for the sector. "Putting P2P lending companies under the broad umbrella of NBFC regulations, however, is going to lead to several major problems," said LoanAdda Co-Founder & CEO, Anshuman Mishra. He said the sector will much rather be recognised for the technology they use to underwrite and will prefer to be governed as a separate entity rather than being broadly classified as NBFCs. Mishra said they will now have the unnecessary burden to comply with Reserve Bank's compliance norms like a minimum capital of Rs 2 crore, meeting fit-and-proper criterion, brick and mortar presence, besides, submitting regulator reports with the regulator. "These represent additional burden on existing P2P players, as one would have to re-evaluate their processes to ensure compliance. "The ideal regulatory structure would be a supervisory toolkit that facilitates the orderly growth of this sector and harnesses its ability to provide an alternative avenue for credit for the right kind of borrowers," he said further. These industry players are also of the view that the regulation will weed out non-serious players from the market on the one side, but will at the same time broaden the agenda of financial inclusion through an easy access to credit. India's P2P lending industry is currently valued at USD 40 million and is expected to grow to about USD 4-5 billion by 2021.