According to some experts, the reason why the Indian regulator was taking a conservative stance could be because of the ugly fallout of the sector in China, where huge default rates and fraud had led to closure of many such P2P lenders in recent years. From a high of more than 2,000 P2P lending platforms, the number of such players in China has fallen by almost half in the current year.
Against this backdrop, RBI wants to take small steps with prudent regulations before opening up the industry for big investors, sources added.
Currently, around 11 start-up companies
hold NBFC-P2P licences with a total loan book size of around Rs 200 crore. Some of the entities working in this space are Finzy, Faircent, OML Technologies, i2iFunding, Peerlend, LenDenClub, Paisadukaan, LiquiLoans and AnyTimeLoan.
"As the first step, if the investment cap is raised, we will be able to raise much more funds from high net-worth individuals, who are eager to pump in more money into these platforms," said Abhinandan Sangam, co-founder and chief technology officer at Bengaluru-based P2P player, Finzy.
Though P2P lending service providers have been in the business since early 2014, RBI regulations pertaining to the industry only came in September 2017. The apex bank had mandated P2P lenders to be registered as non-banking financial companies
Under the current regulations, the total exposure of an individual investor to all P2P players is capped at Rs 10 lakh. Similarly, the exposure of a single investor to the same individual borrower shall not exceed Rs 50,000.
The RBI norms had also put restrictions on the loan amount that can be availed by a borrower at Rs 10 lakh across all P2P players. Similarly, in order to contain asset-liability mismatch, the maturity of the loans provided by such players are capped at a maximum of 36 months. The regulations also make it mandatory for all P2P start-ups to obtain a certificate from the borrower or lender that the limits prescribed by the RBI have been adhered to.
In early January, RBI had also asked NBFC-P2Ps to provide details on their monthly spends and break-up of expenses, apart from seeking the PAN card details of the lenders. Many participants see it as precursor to RBI's future regulations on the investment aspect, as some P2P players are incurring losses due to high operational cost and lower volumes.
"It's the only C2C (consumer-to-consumer) facing industry which provides normal investors an opportunity to put their money in retail assets. So, growth of this industry creates another avenue for investors to diversify their portfolio," added Sangam of Finzy.