pri Peer To Peer Lending Peer To Peer Lending

The Peer-to-peer lending (P2P) platform is a kind of non-banking financial companies (NBFCs) which are regulated by the Reserve Bank of India (RBI).

P2P lending is basically a crowd-funding model where people join to lend their money with people who are in need. In this platform there is a concept where lenders get higher interest by lending their money instead of saving and borrowers also get comparatively lower interest rates.

LEGAL ASPECTS of Peer To Peer Lending


1. There should be a company for undertaking the business of Peer to Peer Lending Platform.

2. Company need to obtain Certificate of Registration (COR)  from the RBI to carry on the business as P2P.

3. The Company should have net owned funds of Rs. 2 crore or such higher amount as the bank may specify in this regard.


All Existing and prospective NBFC-P2P need to make the application for registration as P2P to “Dept of Non Banking Regulation, Mumbai” of the RBI.

Further ever existing entities which are running the business as NBFC-P2P need to make the application within 3 months from the date of this very first notification.

Benchmarks decided by banks :

1. Company should be registered in India.

2. Company should have technological, entrepreneurial and managerial resources for serving the borrowers and lenders on this platform.

3. Adequate capital structure should be there to carry the business of P2P lending platform.

4. Promoters and Directors should be fit and proper.

5. Character of the Management’s company should not be prejudicial to the interest of the general public.

6. The company should submit a robust plan for implementing a secure Information Technology system.

7. Any other condition as specified by the bank from time to time.

After the satisfaction of bank in regard to above mentioned benchmarks. It will issue the COR to the company which will valid for the period of 12 months from the date of approval.

Within the period of 12 months of approval the company needs to have a proper technological platform and enter into other required legal documentation so that it will be able to report the Position of Compliance to the bank.


After granting the COR the bank may cancel it if any of the following conditions will be fulfilled:-

1. Company itself ceases to carry on the business of P2P.

2. Failed to comply with any of the conditions subject to which the COR has been issued by the Bank.

3. Fails to fulfill any of the benchmarks decided for cancellation of registration and also fails to get the suitable technological platform with in the period of 12 months of its registration

4. Fails:

  • To follow the directions issued by the bank.
  • To maintain and disclose the financial position as required in any pertaining law or as required acc to the directions of the bank.
  • Offer and submit the books of a/c and other documents as and when demanded by the bank.


The Registered NBFC P2P shall work on the below mentioned activities:-

1. It shall act as an intermediary providing online market platform.

2. Not allowed to raise deposits.

3. Not allowed to lend the funds on its own.

4. Not allowed to give any kind of credit guarantee.

5. Not allowed to facilitate any kind of secured lending.

6. Not hold the funds in its balance Sheet which were received from the lender to lend or from the borrower to service the loans.

7. Can’t sell any product other than loan specific insurance products.

8. International flow of funds are not allowed.

9. Shall store and process all data relating to their activities and participants on the hardware located in india.


1. Do the due diligence of all participants on the platform.

2. Do the Credit assessment and Risk profiling of the borrowers and need to show it to the concerned lenders.

3. Need prior consent of the participant before accessing its credit information.

4. Documentation of loan agreements.

5. Assist the participant in disbursement and repayment of the loans provided.

6. Provide the services for recover of loans as well.



  • Shall maintain the leverage ratio not exceeding 2.
  • Only cap of Rs. 10 Lakhs is allowed for the lenders to do the lending across all P2P.
  • Only cap of Rs. 10 Lakhs is allowed for the borrower too to have the funds from all P2P.
  • Exposure of lender to the Single borrower shall not be greater than Rs. 50,000/-.
  • The maturity of any loans shall not exceed 36 months.

Further the NBFC P2P shall obtain the certificate in advance from the borrower and lender that all the above mentioned limits has been adhered too by them.


It should have a board approved policy which contains:-

1. Eligibility Criteria for the participants.

2. Pricing of services provided on this platform.

3. Rules for matching the lenders with borrowers in a non biased manner.

  • The NBFC P2P shall be held responsible for the outside service providers in regard to services like of recovery agents and also in regard to maintaining the confidentiality of the information provided by the participants.
  • Unless all parties have signed the contract and the lender accepted the borrower no loan can’t be disbursed form the P2P side


  • Fund transfer can be done only through escrow account which needs to be operated by the trustee.
  • At least 2 escrow a/c shall be maintained on this platform one for receiving the funds from the lender and other for collections of loan amount from the borrower.
  • All transfer of funds shall be done through these bank a/c’s and no cash transactions can’t be made on this NBFC P2P platform.


  • The NBFC P2P shall be a member of all CIC’s and submit all previous data to them.
  • As per the mutual understanding between NBFC P2P and CIC’s the credit information of the borrower’s should be maintained and updated on regular basis either on monthly or such short intervals as per the mutual discussion.

1. Appropriate measures should be taken to ensure that credit information of borrower is up to date, accurate and complete.

2. Necessary consents in the form of covenants should be placed in the agreements with the participants that they have given their consent for providing the required credit information.


A NBFC P2P shall disclose the following to:


1. Details of the borrower’s :-

  • Personal Identity
  • Required amount
  • Interest rate sought
  • Credit score as arrived by the NBFC P2P.
  • Terms & Conditions of the loan
  • Return
  • Fees & Taxes


1. Details of the Lender’s :-

  • Proposed Amount
  • Interest rate offered

Provided the personal identity and contact details of the lender can’t be disclosed.


  1. Score Methodology and factors considered.
  2. Usage and protection of data.
  3. Grievance redressal mechanism.
  4. Portfolio performance including share of non performing assets.
  5. Broad business model.

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


1. A Fair practice code should be there of a NBFC P2P which needs to be approved by the board and also got published on the website of the company for information of stakeholders.

2. The platform should be required to obtain affirmation from the lender that have understood the risks related to the transactions, and in case of default there is no guarantee for return further there are also chances of loss of entire principal in case of default by the borrower.

3. The Platform shall not provide any kind of assurance for recovery of debts.

4. The platform shall display a CEVEAT that RBI does not take any responsibility regarding to the statements or opinions made by the NBFC P2P, and also not provide any assurance for repayment of loans lent on it.

5. The platform shall ensure that the staff are properly trained to deal with the participants in an appropriate manner and shall ensure that there shall not be any kind of any harassment viz: bothering the borrowers in odd hours, use of coercion for recovery of loans, etc.

6. The information received from the participants should not be disclosed to the third parties without the permission of participants.

7. The board shall ensure that there is a periodic review of the compliances of the fair practices code and grievances redressal mechanism at different levels of management.


1. The business of the NFC P2P shall be primarily IT driven.

2. Adequate safeguards should be there in the IT systems to ensure that it is protected.

3. Information system audit of the internal systems shall be conducted at least once in two years by CISA certified external auditors. Report of the external auditor shall be submitted to the regional office of the department of Non-Banking supervision of the bank, under whose jurisdiction the Reg office of the NBFC P2P is located, within 1 month of submission of the report by the external auditor.

4. There shall be reasonable arrangements to ensure that the loan agreements between the participants will continue to be managed by the third party, so that in case if NBFC P2P ceases to carry on the business there should be not any issue arises.


Prior written approval of the bank shall be required for:-

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

2. Any takeover or acquisition of control of NBFC P2P either there is any change in management of it or not.

3. Any change in the management of the NBFC P2P which would result in change in more than 30 % of its directors, excluding independent directors.

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


An NBFC P2P shall submit an application along with the below mentioned documents on the company letter head, those are:-

1. Information about the proposed directors.

2. Sources of funds of the proposed shareholders/ Directors as per Annex V.

3. A declaration should be there that the directors/ Shareholders are not associated with any unincorporated body that is accepting the deposits.

4. A Declaration that the directors/ Shareholders are not associated with any company, the application for COR of which has been rejected by the bank.

5. A declaration that the proposed directors/ shareholders 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.

6. Banker’s Report on the proposed directors/ shareholders.

Application in this regard shall be submitted to the regional office of the department of non-banking supervision of the bank where the company is registered.


A public notice of at least 30 days shall be given before affecting the sale of, or transfer of the ownership by sale of shares, or transfer of control.


Every NBFC P2P shall communicate within 1 month from the occurrence of any change in:-

  • Complete postal address, telephone no and fax no of the registered office.
  • Residential addresses of the directors of the company.
  • Name and office address of the auditors of the company.
  • Specimen signatures of the officers authorized to sign on behalf of NBFC P2P.

To the Regional office of the Department of Non-banking Supervision of the bank within whose Jurisdiction the registered office of the NBFC-P2P is located.


1. The bank can prescribe the returns to be submitted by the NBFC P2P from time to time.

2. The below mentioned quarterly statements shall be submitted to the concerned Regional office with 15 days after the quarter ended:-

1. Statement showing the no and amount in respect of loans:-

  • Disbursed during the quarter.
  • Closed during the quarter.
  • Outstanding at the beginning and at the end of the quarter, including the no of lenders and borrowers outstanding as at the end of the quarter.

2. The amount of funds held in the escrow a/c, there should also be a bifurcation of funds received from the lenders and borrowers, along with debit and credit summations for the quarter.

3. No of complaints outstanding at the beginning and at the end of quarter, and further disposed of  in the quarter, the bifurcation needs to be made like how many received from the borrowers side and how many from lenders.

4. Leverage Ratio, with details of the numerator and denominator.

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One Comment

  1. Chesta kaushik says:

    Madam you have mentioned that CoR is valid for 12 months… But according to my interpretation in principle approval given by RBI is valid for 12 months and meanwhile the NBFC P2P has to complete all the said formalities be it technology wise and agreement then if satisfied RBI will give CoR …

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July 2021