February 1, 2019
Delhi based P2P Lending platform, Lendbox has received its NBFC – Peer-to-Peer (P2P) certification from the RBI. NBFC-P2P is a new class of NBFCs, for non-banking institutions which carry on the business of Peer to Peer Lending in adherence to the guidelines released by Reserve Bank of India (RBI) in October 2017 to regulate the sector in India.
Ekmmeet Singh, Founder & CEO, Lendbox, Bhuvan Rustagi, COO, Lendbox and Jatin Malwal, CTO, Lendbox
Lendbox began operations in November 2015 and is one of India’s largest P2P Lending platforms with almost 200,000 registered users and a loan book size of almost 40 Crores. The company recently raised 6 Crore INR from Mumbai-based VC Ivy Cap Ventures in a pre-series A round of funding.
The P2P Lending Industry in India is growing rapidly year-on-year and is expected to hit the US$ 4-5 Bn mark by 2023. The RBI first took note of P2P lending in April 2016 when it invited suggestions from existing platforms for framing regulations for the sector. It finally came out with these regulations in October 2017 – requiring these platforms to register themselves as NBFCs. Though the P2P lenders feel the regulations are a bit conservative but given the nascent stage of the sector, it is justified for RBI to have a conservative standpoint. The regulator has said during discussions that the guidelines can be changed based on industry and stakeholder inputs. The RBI has restricted the maximum investment amount at INR 10,00,000 per individual investor across all P2P platforms and it has also mandated a minimum net owned funds of INR 2 Crores for the platforms to operate.
Lendbox provides a platform for borrowers and lenders to transact on mutually acceptable terms. The company uses its tech-based proprietary algorithm to assess a borrowers’ creditworthiness. Lenders can seamlessly transact with borrowers – sending, receiving and negotiating proposals as well as transferring money via Lendbox’s escrow accounts. This has not only simplified the lending process but made it much more rewarding as well. Ekmmeet Singh, Founder & CEO of Lendbox said – “Getting the CoR (Certificate of Registration) from the Reserve Bank boosts the credibility of our platform and reinforces the trust that Lendbox carries amongst its borrowers and lenders. It was an important step for us in order to get closer to our mission of getting every Indian access to the credit they deserve and will help in strengthening our position in the peer to peer lending space in India.”
P2P Lending helps in removing the middleman between borrowers and lenders is democratizing the banking system. It helps the lenders in getting a higher return on their investment while simultaneously, the borrowers get a loan at a significantly lower cost. The platforms are giving a tough competition to new-age digital lenders by drastically reducing disbursal times and making it much more easier for repeat borrowers to get a new loan. The recent liquidity crunch with NBFCs has also diverted a lot of borrowers to P2P Lending platforms.
Bhuvan Rustagi, the COO at Lendbox added – “With the NBFC-P2P licence, Lendbox, just like any other NBFC, comes under RBI’s purview with regards to regulatory oversight. Lendbox will be now reporting all the delays and defaults by the borrowers on the platform to CIBIL and other credit bureaus which will be a significant help in cutting down delays and defaults by the borrowers – making it a much more safer investment for our lenders.”
The emergence of peer to peer lending disrupted the conservative approach followed by the Indian financial institutions and unlocked an untapped source for the short to medium term personal finance needs. With the industry being regulated, it is now much more safe and recognized and both credit seekers and investors can immensely benefit themselves from it.