The RBI, pursuant to its circular no. RBI/2019-20/121 DOR.NBFC(PD) CC.No.106/03.10.124/2019-20 dated 23 December 2019, issued to all non-banking financial companies, has decided as follows:
- the aggregate exposure of a lender to all borrowers at any point of time, across all P2P platforms, shall be subject to a cap of Rs. 50,00,000 (increased by five times from the existing limits of Rs. 10,00,000) provided that such investments are consistent with the net worth of the concerned lender;
- lenders investing more than Rs. 10,00,000 across P2P platforms shall provide a certificate to P2P platforms from a practicing-chartered accountant, certifying minimum net-worth of Rs. 50,00,000;
- lenders shall provide a declaration to P2P platforms, stating thereunder that they have understood all the risks associated with lending transactions and that P2P platform does not assure return of principal/payment of interest; and
- the escrow accounts which are required to be operated by a bank promoted trustee for transfer of funds, need not be mandatorily maintained with a bank which has promoted the trustee.
DSK Legal's Observations: The above circular is seen as a move by the RBI, to boost peer-to-peer (P2P) lending platforms. Increasing the existing limits for lenders across all P2P platforms and the removal of the requirement of escrow accounts to be operated by a bank-promoted trustee for transfer of funds will aid in providing flexibility in operations. Additionally, declaration from lenders and a certificate of minimum net worth seem to be steps towards making the process of P2P lending safer and more reliable.
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