On Friday, the Reserve Bank enhanced regulations for non-banking financial companies peer-to-peer lending platforms (NBFC-P2P Lending Platform) to bolster transparency and adherence to rules.
According to the updated master direction from the RBI, P2P platforms are prohibited from advertising peer-to-peer lending as an investment opportunity with characteristics such as guaranteed minimum returns linked to tenure, liquidity options, and so forth.
Non-Banking Financial Companies Peer-to-Peer Lending Platforms (NBFC-P2P Lending Platforms) are prohibited from cross-selling any insurance products that are in the nature of credit enhancement or credit guarantee. Additionally, loans should not be disbursed unless the lenders and borrowers have been matched or mapped according to the policy approved by the board.
The RBI issued guidelines for P2P lending in 2017. Such a platform acts as an intermediary providing an online marketplace/platform to the participants involved in peer-to-peer lending.
However, it has been observed that some of these platforms have adopted certain practices, which were violative of the provisions of Master Direction 2017.
"Such practices include, among others, violation of the prescribed funds transfer mechanism, promoting peer-to-peer lending as an investment product with features like tenure linked assured minimum returns, providing liquidity options and at times acting like deposit takers and lenders instead of being a platform," it said.
In view of violations by some entities, the RBI issued amended guidelines. The revised guidelines come into effect immediately.
(With PTI Inputs.)
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