MUMBAI: The Reserve Bank of India is working on guidelines for peer-to-peer lending arrangements offered by online platforms, according to its deputy governor, R Gandhi.

“RBI is actively studying the peer-topeer lending arrangements that are gaining traction…. based on a detail study, we intend to bring out a discussion paper for public consultation,” Gandhi said at a CII seminar here on Monday, adding that risks for such new kind of lending will have to be taken into account.

This form of lending is popular among individual borrowers and lenders, especially in the small and medium enterprises segment. These lenders don’t need regulatory approval and are not registered as non-banking financial companies (NBFCs). These portals connect lenders and borrowers for a fee. Investors earn returns of anything between 12 per cent and 36 per cent by lending on the platform.

“They should be regulated under the State Money Lenders Act,” said Raman Agarwal, chairman of Finance Industry Development Council. “On these platforms, lenders are individuals and State Money Lenders Act applies to individuals, and not entities. In this case, individual is not an individual lender but a camouflaged lender.”

These firms claim that they lend to people with little credit history. “One of the biggest problems for alternate finance providers like us is what do you do about people who have little or no credit history, but want to borrow money,” Rajat Gandhi, CEO of peer-peer lending marketplace had told ET recently.

“In fact, this is a problem that banks and other institutional credit systems have grappled with for years. Known in the lending parlance as borrowers with a “thin file”, people with little credit history can be both an opportunity and a risk.”

Read full article: Economic Times

By praful

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