Banking

RBI to regulate peer-to-peer lending firms

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 RBIIn a gazette notification issued by the Central Government, the Reserve Bank of India (RBI) said that all peer-to-peer lending (P2P) platforms will be regulated by the banking regulator.

Moreover, on being satisfied by the necessity the central bank has identified peer-to-peer lending startups will be treated as non-banking finance companies (NBFCs) and will be brought under the ambit of the banking regulator.

“The Reserve Bank of India, on being satisfied that it is necessary to do so, in exercise of the powers conferred on it by… the Reserve Bank of India Act 1934, (2 of 1934) with prior approval from the government, hereby specifies, a non-banking institution that carries on the business of a peer-to-peer lending platform to be a non-banking financial company,” the notification stated.

Peer-to-peer lending (P2P) enables individuals to borrow and lend money  without the use of an official financial institution as an intermediary.

RBI is likely to release for regulation of P2P lending in India.

RBI had released a consultation paper in this connection in April 2016. “The financial sector is not immune from the advent of online industry and its potential impact. For this reason, it is attracting attention of analysts, investors, customers, businesses and regulators in a major way,” the banking regulator stated in the paper.

“The potential benefits that P2P lending promises to various stakeholders (to the borrowers, lenders, agencies etc) and its associated risks to the financial system are too important to be ignored. The Reserve Bank has therefore found it necessary to put out this discussion paper to elicit public opinion and views of the various stakeholders on the future course of action in regard to the current legal and regulatory framework in place to regulate the business of financial intermediation.”

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