What changed
RBI observed P2P platforms violating existing rules by offering assured returns, liquidity options, and acting like lenders. The amended Master Direction explicitly prohibits platforms from assuming any credit risk, directly or indirectly, and clarifies that lenders must bear all losses of principal or interest. Platforms cannot cross-sell insurance products that act as credit enhancement or guarantee. The lender exposure cap of Rs 50 lakh remains, with a net-worth certificate requirement for lending above Rs 10 lakh.
What it means for you
P2P platforms must strictly operate as intermediaries, not as lenders or deposit-takers. Banks and NBFCs should review any partnerships with P2P platforms to ensure compliance, as violations could lead to regulatory action. The prohibition on credit risk assumption means platforms cannot offer any form of guarantee or credit enhancement, impacting their business models and risk-sharing arrangements.
What you must do
- Review your P2P platform's operations to ensure no credit risk is assumed, directly or indirectly.
- Update fair practices code to clearly disclose that lenders bear all losses of principal and interest.
- Ensure no cross-selling of insurance products that function as credit enhancement or guarantee.
- Verify lender net-worth certificates for exposures above Rs 10 lakh across all P2P platforms.
- Implement the new rules immediately, except for item I(f)(ii) which is effective from November 14, 2024.
Who it affects
NBFC-P2P Lending Platforms, Lenders on P2P platforms, Borrowers on P2P platforms, Banks and NBFCs with P2P partnerships, Chartered Accountants certifying lender net-worth
What happens if a P2P platform violates the new rules?
RBI has stated that violations observed will be dealt with bilaterally for remediation. Continued non-compliance could lead to stricter regulatory action, including penalties or revocation of registration.
Are lenders now fully responsible for losses on P2P platforms?
Yes, the amended provision clarifies that the entire loss of principal or interest, or both, from funds lent on the platform shall be borne by the lenders. Platforms must make adequate disclosures to this effect.
When do the new rules take effect?
Most provisions take effect immediately from August 16, 2024. However, item I(f)(ii) of the Annex will be effective from 90 days after the circular date, i.e., November 14, 2024.