NBFCs tie up with P2P lending firms to source customers

RBI looking to monitor sector as it's gaining momentum with several online players setting shops

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Non-banking financial companies (NBFCs) have begun to tie up with entities in the peer-to-peer lending (P2PL) space, to scout for potential customers.

This comes even as the Reserve Bank of India (RBI) flags concerns over this type of lending, since it continues to be an informal channel. It does not come under the ambit of the banking regulator and RBI is mulling whether this should change. This sector has been gaining momentum in the past couple of years and several online players have sprung up, which is why RBI is now looking at monitoring it.

Those in the segment, say the smaller NBFCs have been tying up with online entities to cut on cost. “If you are a small NBFC, the cost of loan origination can be prohibitive. Typically, if you process 10 loan applications, you end up giving a loan only to one customer. As a result, the cost of credit verification is high. However, on our platform, they are getting verified data and this brings down their cost,” said Shankar Vaddadi, founder of i-lend.in, a P2PL platform.

Another player in the space says, at a time when overall credit in the banking system has been subdued, such tie-ups allow these NBFCs to tap into the customer base that might not be a part of the formal banking channel.

P2PL allows an individual to lend money to unrelated individuals without assistance from any financial intermediary. “We have various customers who are coming online looking to get a loan and these include small and medium enterprises, apart from individuals. Considering we place so many checks, the risk profiling of these customers becomes easy and, therefore, it is more convenient for even NBFCs to tap into this base and offer loans,” said the head of another P2PL platform.

They say some private banks have also expressed interest in the P2PL space but no tie-ups have happened.

One mid-size NBFC entity that hasn’t made a deal with any in P2PL but is exploring an arrangement said it made sense; it turns out to be a ‘win-win’ for customers and the company. “Since our cost comes down, and after the checks and processes placed by this online platform, their risk profiling becomes better, we can also pass on the benefit to the customer by offering a better rate of interest.”

The rate levied on these online platforms can be anywhere between zero and 36 per cent. The maximum amount these allow to be borrowed is Rs 5 lakh.

NEWER AVENUES

• To scout for potential customers, NBFCs have begun to tie up with entities in online peer-to-peer lending space
   
• Such tie-ups will help small NBFCs to cut costs and allow them to tap into a customer base which is not part of the formal banking channel
   
• The maximum amount that can be borrowed in P2P lending is Rs 5 lakh
   
• The rate levied can be anywhere between 0-36%