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Peer to Peer Lending License
Peer to Peer (P2P) is a kind of lending or it can be said that it is a online platform to raise loans which are to be given back with interest and there is no involvement of Financial institution, therefore lenders are free to chose borrowers. Both either an individual or legal entity can borrow the funds, and the rate of interest can be set or charged by the online platform or otherwise can be mutually decided between the parties by way of an agreement. For strups P2P lending is considered to a best way of lending as in starting it is very difficult to find any venture capitalitalist.
What is Peer to Peer Lending License?
Since P2P lending which are having online platform are governed by the guidelines of RBI. therefore. It is necessary for them to obtain its License. It also benefits both lenders as well a the borrowers. For individuals to commence activities of P2P online, then they have to obtain license from license or registers themselves on the website and thereafter P2P lending platform carries out due diligence and approves the application for participation in lending/borrowing activity.
What are the characteristics of Peer to Peer Lending Platform?
Following are the characteristics of P2P -
1) P2P lending involves online transactions.
2)It is not necessary to have prior relationship between the lender and the borrower.
3)On P2P Online Platform, lenders are free to chose borrowers to invest in.
4)There is no direct intermediary negotiating interest rates or amount.
1) P2P lending involves online transactions.
2)It is not necessary to have prior relationship between the lender and the borrower.
3)On P2P Online Platform, lenders are free to chose borrowers to invest in.
4)There is no direct intermediary negotiating interest rates or amount.
Peer to Peer Lending in India
Online Platform is provided for borrowers and investors through which people can lend and borrow money for the satisfaction of their financial motives. In India in the the year 2016-2017, lending from bank loans were slow down, and during that phase demand for Peer to peer lending increased and accordingly related laws and awareness came amongst the people. Presently there are more than 30 players in the market like faircent, lentbox, capital float, indifi, Indiamoneymart, Monexo, Rupaiya exchange, Capzest Loan Baba, i2iFunding etc.
For the regulation of P2P in India, RBI releases guidelines so that they can grow in a more structured, fair and regulated manner. Last year RBI also through its Notification clears that Peer to peer lending platform would be treated as non-Banking-Financial Companies (NBFC). RBI also releases or issue guidelines time to time for safeguard the interest of all lending platform and lenders as well as borrowers.
For the regulation of P2P in India, RBI releases guidelines so that they can grow in a more structured, fair and regulated manner. Last year RBI also through its Notification clears that Peer to peer lending platform would be treated as non-Banking-Financial Companies (NBFC). RBI also releases or issue guidelines time to time for safeguard the interest of all lending platform and lenders as well as borrowers.
FAQ
Common List Of Questioner That Our Customer Ask From Us -Solved !
What are pros and cons of Peer to Peer lending Platform?
For Borrowers
Pros of P2P lending includes lower rate of interest involves, and also there is fixed rate of interest, then customers are provided with digital experience of facilitating rapid flow of transaction and there is Lower fees involved.
Cons of P2P includes as compared with banks, it involves less/low amount of loan, and there is less security involves, also sometimes it happens that number of borrowers are more than the number of lenders.
For Lenders
Pros of P2P lending includes higher returns, it involves wide variety of option available to put their capital into, and direct communication with buyer is involved.
Cons of P2P includes returns in case of P2P is lower as compared to publicly traded index fund.
Pros of P2P lending includes lower rate of interest involves, and also there is fixed rate of interest, then customers are provided with digital experience of facilitating rapid flow of transaction and there is Lower fees involved.
Cons of P2P includes as compared with banks, it involves less/low amount of loan, and there is less security involves, also sometimes it happens that number of borrowers are more than the number of lenders.
For Lenders
Pros of P2P lending includes higher returns, it involves wide variety of option available to put their capital into, and direct communication with buyer is involved.
Cons of P2P includes returns in case of P2P is lower as compared to publicly traded index fund.
What is the procedure for getting registered as Investment Advisor ?
1) Applicant seeking to get himself registered as investment advisor shall file its application in form A along with the required documents provided in the regulation with a non-refundable fee. For individual firms fees of Rs. 5000/- is there whereas in case of Body corporate including LLPs fees of Rs. 25,000/- is there.
2) On the receipt of application, Board may require the applicant to furnish more documents or can also ask for any kind of clarification by calling them. The total time for its registration totally depends on how they fulfill all the requirements and provide all information in all respects.
3)Before gentaing of the certificate board will consider that whether an applicant is an individual or a Body corporate, and in case applicant is individual then he must possess the following qualification-
-A professional qualification or postgraduate degree or post graduate diploma in finance, accountancy, Business management, commerce, economics, capital marketing, banking, insurance or an institution recognized by the Central Government or State Government, or a Foreign institution or university or association.
- A graduate in any discipline with an experience of at least five years in activities related to advice in financial products or securities or fund or assets or portfolio management.
-Or other requirements as specified in regulation 7.
4. Whereas in case applicant is a Body corporate or LLP, then all those who provide investment advice must be a qualified professional as specified in regulation 7.
5. Applicant should fulfill the capital adequacy requirement as specified in regulation 7, that a Body corporate shall not be having net worth not less than 25 lakhs, whereas in case of an individual net worth should not be less than INR 1 Lakh.
6. Once the Board is satisfied that the applicant complies with all the requirements as specified in regulations, shall send the intimation to the applicant and on receipt of fees in case of individual and firms Rs. 10,000 and in case of Body Corporate including LLP Rs. 5,00,000/-.
After all the requirements Board will grant the certificate in form B as specified in regulations. It remains valid unless it shall be cancelled or suspended.
2) On the receipt of application, Board may require the applicant to furnish more documents or can also ask for any kind of clarification by calling them. The total time for its registration totally depends on how they fulfill all the requirements and provide all information in all respects.
3)Before gentaing of the certificate board will consider that whether an applicant is an individual or a Body corporate, and in case applicant is individual then he must possess the following qualification-
-A professional qualification or postgraduate degree or post graduate diploma in finance, accountancy, Business management, commerce, economics, capital marketing, banking, insurance or an institution recognized by the Central Government or State Government, or a Foreign institution or university or association.
- A graduate in any discipline with an experience of at least five years in activities related to advice in financial products or securities or fund or assets or portfolio management.
-Or other requirements as specified in regulation 7.
4. Whereas in case applicant is a Body corporate or LLP, then all those who provide investment advice must be a qualified professional as specified in regulation 7.
5. Applicant should fulfill the capital adequacy requirement as specified in regulation 7, that a Body corporate shall not be having net worth not less than 25 lakhs, whereas in case of an individual net worth should not be less than INR 1 Lakh.
6. Once the Board is satisfied that the applicant complies with all the requirements as specified in regulations, shall send the intimation to the applicant and on receipt of fees in case of individual and firms Rs. 10,000 and in case of Body Corporate including LLP Rs. 5,00,000/-.
After all the requirements Board will grant the certificate in form B as specified in regulations. It remains valid unless it shall be cancelled or suspended.
Scope of Activities in P2P ?
There are scope of activities which are involved under P2P lending and they are as follows-
1. Act as an intermediary
2. P2P lending platform is not permitted to lend on its own.
3. Not permitted to arrange credit enhancement/ guarantee
4. P2P lending platform do not possess the power to permit any secured lending.
5. Any other financial product cannot be sold.
6. International flow of funds cannot be permitted
7. It is mandatory to adhere all mandatory legal norms.
1. Act as an intermediary
2. P2P lending platform is not permitted to lend on its own.
3. Not permitted to arrange credit enhancement/ guarantee
4. P2P lending platform do not possess the power to permit any secured lending.
5. Any other financial product cannot be sold.
6. International flow of funds cannot be permitted
7. It is mandatory to adhere all mandatory legal norms.
What is the Funding process under Peer to Peer Lending?
1. P2P Funding can be done through auction.
2. It also can be done via fixed rate of auction.
3. Under P2P marketplace lending model, in this model P2P platform will either itself or the finance associates or the bank associated with the platform will compete and underwrite the loan requirement of the borrower.
2. It also can be done via fixed rate of auction.
3. Under P2P marketplace lending model, in this model P2P platform will either itself or the finance associates or the bank associated with the platform will compete and underwrite the loan requirement of the borrower.
What are the types of Peer to Peer lending models?
1. Consumer Lending- This includes loans like for cars, self wedding, holidays, home repairs etc.
2. Small Business (SME) Lending- Small Businesses loans are given to small businesses for the following purposes-
-Working Capital
-Business Expansion
-Asset Finance
3. Property Lending- This is considered as secured P2P lending. Generally loan is borrowed for [personal mortgages, Buy-To-Lets, Residential Refurbishment, and developing commercial loans.
2. Small Business (SME) Lending- Small Businesses loans are given to small businesses for the following purposes-
-Working Capital
-Business Expansion
-Asset Finance
3. Property Lending- This is considered as secured P2P lending. Generally loan is borrowed for [personal mortgages, Buy-To-Lets, Residential Refurbishment, and developing commercial loans.
What are basic requirements for obtaining P2P License ?
1. P2P can be registered as an intermediary with their motive to bring the lender and borrower together without reflecting the lending and borrowing in its balance sheet. If there is any Cross border transactions then FEMA guidelines needs to be followed. Also in this case money will directly be transferred from lender’s account to the Borrower’s account.
2. A Minimum capital of 2 crores is required in this case.
3. Government compliances have to be followed like there should be reasonable portion of members having a financial background.
4. There should be business continuity plan of P2P lending.
5. Customer interface needs to be taken care of, like it is the duty of the portal to safeguard the information of their customers in the first place.
6. These online platforms are required to submit regular reports based on their financial position, loans arranged in each quarter, complaints received in each quarter etc. to the Reserve Bank of India.
7. More than 1 Million amount cannot be given to the borrower.
2. A Minimum capital of 2 crores is required in this case.
3. Government compliances have to be followed like there should be reasonable portion of members having a financial background.
4. There should be business continuity plan of P2P lending.
5. Customer interface needs to be taken care of, like it is the duty of the portal to safeguard the information of their customers in the first place.
6. These online platforms are required to submit regular reports based on their financial position, loans arranged in each quarter, complaints received in each quarter etc. to the Reserve Bank of India.
7. More than 1 Million amount cannot be given to the borrower.
What is the Procedure for Obtaining Peer to Peer Lending License?
1. Company should be registered in India as a Private limited company or Public Limited Company with the principle objective of financing.
2. Minimum net owned funds of INR 2 cores.
3. Website/Mobile app workflow
4. The online application is available on RBI website (COSMOS)
5. Submission of hard copy of the application along with attached documents shall be submitted to RBI Office.
6. The License will be granted only after vigilant inspection of the application and documents attached with it.
2. Minimum net owned funds of INR 2 cores.
3. Website/Mobile app workflow
4. The online application is available on RBI website (COSMOS)
5. Submission of hard copy of the application along with attached documents shall be submitted to RBI Office.
6. The License will be granted only after vigilant inspection of the application and documents attached with it.
What is P2P lending platform?
It is a type of lending platform which connects borrower and lender with each other.
What is validity of P2P lending license?
It is valid for 12 months from the date approval is granted.
Is cash transaction permitted to transfer the funds?
No
Is P2P lending safe?
It depends on the factor like lending money to the low risk borrowers after proper verification.
How can BIATConsultant help you?
BIATConsultant has a team of experienced professional. We are here to tackle all the legal formalities on your behalf.
