Peer-To-Peer Lending: RBI Awaits Government Notification To Issue Norms
RBI is waiting for a gazette notification post which it will bring P2P norms in its ambit.
The Reserve Bank of India is waiting for a gazette notification from the government on getting the peer-to-peer lenders under its regulatory ambit before issuing guidelines on the sector, a senior official said on Wednesday.
“Following up on the consultation paper we did last year, we are shortly going to come up with guidelines on peer to peer lending,” RBI Executive Director Sudarshan Sen said at an industry event in Mumbai.
Sen said a notification from the government is the missing part, which is preventing the RBI from releasing the final guidelines.
First, we need the government to notify P2P platforms as an entity to be regulated by RBI. That requires a gazette notification. Once that happens, we come out with regulation.Sudarshan Sen, Executive Director, RBI
He added that the legislative change for the same has already come in and it is only a gazette notification that is required.
A June 29 report quoting top finance ministry sources had said that RBI will come out with the final guidelines in 2-3 weeks.
"We have given our comments to the RBI. The guidelines should be out soon. The norms will be out before July-end," the official had said. He also said the finance ministry has recommended that these platforms be registered as non-banking financial institutions.
P2P platform needs to be regulated by the RBI so as to ensure players play by the rule.Sudarshan Sen, Executive Director, RBI
According to the official, the P2P lending interface will come under the purview of RBI’s regulation by defining these platforms as non-banking financial companies (NBFCs) under the RBI Act by issuing a notification in consultation with the government.
The proposed regulatory framework would encompass the permitted activity, regulations on capital, governance, business continuity plan and customer interface, apart from regulatory reporting, the official added.
"Although nascent in India and not significant in value yet, potential benefits that P2P lending promises to various stakeholders (to borrowers, lenders, agencies etc) and its associated risks to the financial system are too important to be ignored," the consultation paper said.
P2P lending is a form of crowd-funding used to raise loans, which are paid back with interest. It can be defined as the use of an online platform that matches lenders with borrowers in order to provide unsecured loans.
The borrower can either be an individual or a legal person requiring a loan. The interest rate may be set by the platform or mutual agreement between the borrower and the lender.
