As per RBI Master direction the following compliances needs to complied by an NBFC P2P lending Platform:

As per RBI Master direction the following compliances needs to complied by an NBFC P2P lending Platform:

1. Submission of data to CICs;

2. Transparency and Disclosure Requirements;

3. Fair Practice Code;

4. Participant Grievance Redressal;

5. Information Technology Framework, Data Security and Business Continuity Plan;

6. Fit and Proper Criteria;

7. Approval of RBI required before performing taking specified actions;

8. Reporting Requirements;

Apart from above an NBFC P2P shall also required to adhere the prudential norms and other compliances as specified in the Master Direction. This presentation is compliance oriented only in respect of disclosures, reporting, filings and IT requirement etc.

1. Submission of data to CICs

a) P2P NBFC shall become member of all CICs and submit data to (including historical) them.

b) NBFC P2P shall:

i. Keep the credit information (relating to borrower transactions on the platform) maintained by it, updated regularly on monthly basis or as may be mutually agreed between NBFC P2P and the CICs;

ii. Take all such steps to ensure that the credit information furnished by it, is up to date, accurate and complete;

iii.Include necessary consents in the agreement with the participants for providing the required credit information;

2. Transparency and Disclosure Requirements

a) An NBFC-P2P shall be required to disclose the following:

i. To the lender:

1) Details of the borrower/s i.e. personal identity, required amount, interest rate sought and credit score as arrived by the NBFC-P2P.

2) Details about all the T&Cs of the loan, including likely return, fees and taxes;

ii. To the borrower:

1) Details about the lender/s including proposed amount, interest rate offered but excluding personal identity and contact details;

iii. Publicly disclose on its website:

1) Overview of credit assessment/score methodology and factors considered;

2) Disclosures on usage/protection of data;

3) Grievance redressal mechanism;

4) Portfolio performance including share of non-performing assets on a monthly basis and segregation by age; and

5) Its broad business model

b) NBFC-P2P shall ensure that the providing of services to a participant, who has applied for availing of such services, is backed by appropriate agreements between the participants and the NBFC-P2P. The agreements shall categorically specify all the terms and conditions among the borrower, the lender and the NBFC-P2P

c) The interest rates displayed on the platform shall be in Annualized Percentage Rate (APR) format.

3. Fair Practice Code

a) An NBFC-P2P shall put in place a Fair Practices Code, based on the Guidelines issued by RBI, with the approval of its Board;

b) The same should be put up on its web-site, for the information of various stakeholders;

c) In the matter of recovery of loans, NBFC-P2P shall ensure that the staff are adequately trained to deal with the participants in an appropriate manner and shall not resort to harassment viz;

d) NBFC-P2P shall ensure that any information relating to the participants received by it is not disclosed to any third party without the consent of the participants;

e) The Board of Directors shall also provide for periodic review of the compliance of the Fair Practices Code and the functioning of the grievances redressal mechanism at various levels
of management;

f) A consolidated report of such reviews shall be submitted to the Board at regular intervals, as may be prescribed by it;

4.Participant Grievance Redressal

a) A Board approved policy to address participant grievances/complaints.

b) NBFC-P2P shall display the following information prominently, for the benefit of participants, on its website:

i. The name and contact details (Telephone / Mobile Nos. as also email address) of the Grievance Redressal Officer who can be approached for resolution of complaints against the NBFC-P2P.

ii. That if the complaint / dispute is not redressed within a period of 1 month, the participant may appeal to the Customer Education and Protection Department of the RBI.

5. Information Technology Framework, Data Security and Business Continuity Plan

a) There should be adequate and robust safeguards built in its IT systems to get protected against unauthorized access, alteration, destruction, disclosure or dissemination of records and data.

b) NBFC-P2P should have a Board approved Business Continuity Plan in place for safekeeping of information and documents and servicing of loans for full tenure in case of closure of platform.

c) Information System Audit of the internal systems and processes shall be in place and shall be conducted at least once in two years by CISA certified external auditors.

d) Report of the external auditor shall be submitted to the Regional Office of the Department of Non-Banking Supervision of the RBI, under whose jurisdiction the Registered Office of the NBFC-P2P is located, within 1 month of submission of the report by the external auditor.

e) There shall be reasonable arrangements in place to ensure that loan agreements facilitated on the platform will continue to be managed and administered by a third party in accordance with the contract terms, if the NBFC-P2P ceases to carry on the P2P activity.

f) NBFC-P2P would be required to conform with Master Direction issued by the RBI on Information Technology Framework for NBFC Sector, as stipulated in Section A from inception.

6. Fit and Proper Criteria

a) An NBFC-P2P shall:

i. Have a Board approved policy setting out ‘Fit and Proper’ criteria to be met by its directors. These criteria shall be consistent with the RBI Directions.

ii. Ensure that Directors meet the fit and proper criteria at the time of their appointment and on an ongoing basis, certify and inform the same to the RBI on a half-yearly basis;

iii. Obtain a declaration and undertaking from the Directors giving additional information. The declaration and undertaking shall be on the lines of directions issued by the RBI;

iv. Obtain a Deed of Covenants signed by the Directors, which shall be in the format as provided by RBI;

b) Inform the RBI for any change of Directors/KMP and issue a certificate from the MD/CEO that the fit and proper criteria in selection of the Directors have been followed.

c) Within 15 days of the change, the statement must reach the Regional Office of the Department of Non-Banking Supervision of the RBI under whose jurisdiction the Registered Office of the NBFC-P2P is located.

d) An annual statement shall be submitted by the CEO of the NBFC-P2P to the said Regional Office giving the names of its Directors for the quarter ending on March 31, which should be certified by the auditors.

e) RBI , if it deems fit and in public interest, may independently assess whether the directors are, individually or collectively, fit and proper and the NBFC-P2P shall remove the concerned director/s, on being advised by the RBI to do so.

7. Prior Approval of RBI in certain cases

a) Prior written permission of the RBI shall be required for:

i. Any allotment of shares which will take the aggregate holding of an individual or group to equivalent of 26% and more of the paid up capital of the NBFC-P2P;

ii. Any takeover or acquisition of control which may or may not result in change of management;

ii. Any change in the shareholding including progressive increases over time, which would result in acquisition by/ transfer of shareholding to, any entity, of 26 per cent or more of the paid up equity capital of the NBFC-P2P;

Provided that, prior approval would not be required in case of any shareholding going beyond 26% due to buyback of shares / reduction in capital where it has approval of a competent Court. The same is to be reported to the RBI not later than 1 month from its occurrence;

iv. Any change in the management of the NBFC-P2P which would result in change in more than 30 per cent of the Directors, excluding independent Directors;

v. Any change in shareholding that will give the acquirer a right to nominate a Director.

b) An NBFC-P2P shall submit an application for obtaining prior approval of the RBI, along with the following documents:

i. Information about the proposed Directors/ shareholders;

ii. Sources of funds of the proposed shareholders acquiring the shares in the NBFC-P2P;

iii. Declaration by the proposed Directors/ shareholders that they are not associated with any unincorporated body that is accepting deposits;

iv. Declaration by the proposed Directors/ shareholders that they are not associated with any company, the application for CoR of which has been rejected by the RBI;

v. Declaration by the proposed Directors/ shareholders that they have not been convicted of any crime and that there are no pending criminal cases against them, including proceedings initiated under section 138 of the Negotiable Instruments Act,1881; and

vi. Bankers’ Report on the proposed Directors / shareholders

Applications in this regard shall be submitted to the Regional Office of the Department of Non-Banking Supervision of the RBI where the company is registered.

c) Public Notice about Change in Control/ Management:

i. A public notice of 30 days shall be given before effecting the sale of, or transfer of the ownership by sale of shares, or transfer of control, whether with or without sale of shares.

Such public notice shall be given by the NBFC-P2P and also by the other party or jointly by the parties concerned, after obtaining the prior permission of the RBI.

ii. The public notice shall indicate the intention to sell or transfer ownership/control, the particulars of transferee and the reasons for such sale or transfer of ownership/ control. The notice shall be published in at least one leading national and in one leading local (covering the place of registered office) vernacular newspaper.

d) Information with respect to change of address, directors, auditors, etc. to be submitted:

i. Every NBFC-P2P shall communicate, not later than 1 month from the occurrence of any change in:

1) The complete postal address, telephone number/s and fax number/s of the registered / corporate office;

2) The residential addresses of the Directors of the company;

3) The names and office address of the auditors of the company; and

4) The specimen signatures of the officers authorised to sign on behalf of the NBFC-P2P to the Regional Office of the Department of Non-Banking Supervision of the RBI within whose jurisdiction the Registered Office of the NBFC-P2P is located.

5) NBFC-P2P shall conduct a self-assessment of their existing outsourcing arrangements and bring these in line with the directions prescribed by RBI

8.Reporting Requirements

a) The following quarterly statements shall be submitted to the aforesaid Regional Office within 15 days after the quarter to which these relate.

i. A statement, showing the number and amount in respect of loans;

1) disbursed during the quarter;

2) closed during the quarter; and

3) outstanding at the beginning and at the end of the quarter, including the number of lenders and borrowers outstanding as at the end of the quarter

ii. The amount of funds held in the Escrow Account, bifurcated into funds received from lenders and funds received from borrowers, with credit and debit summations for the quarter.

iii. Number of complaints outstanding at beginning and at end of quarter, and disposed of during the quarter, bifurcated as received from

1) lenders and

2) borrowers.

iv. The Leverage Ratio, with details of its numerator and denominator.

(Author can be reached at harsshgolchaa@gmail.com)

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