The Reserve Bank of India (RBI) has increased lending limit for Non-Banking Financial Company (NBFC) Peer- to-Peer (P2P) lending platforms to Rs 50 lakh.
This comes as a major relief to P2P platforms, which have been requesting a revision in the lending cap to be able to grow faster and bring more high net worth individuals (HNIs) on board.
A P2P lending platform is one that connects those looking to borrow with lenders. These are generally unsecured, instant personal loans.
Until now, the cap was at Rs 10 lakh. However, the exposure of a single lender to borrower is capped at Rs 50,000. This means that a lender on the P2P platform cannot lend more than Rs 50,000 to the same borrower across all P2P platforms at any point in time.
“A review of the functioning of the lending platforms and lending limit was carried out and it has been decided that in order to give the next push to the lending platforms, the aggregate exposure of a lender to all borrowers at any point of time, across all P2P platforms, shall be subject to a cap of Rs 50 lakh,” RBI said in its Statement on Developmental and Regulatory Policies.
The RBI has also proposed to do away with the current requirement that escrow accounts to be operated by a bank-promoted trustee for transfer of funds having to be necessarily opened with the concerned bank. An escrow account is an account where funds are held while two or more parties complete a transaction.
According to the RBI, the latest move will help provide more flexibility in P2P operations.