Peer to Peer lending offers an alternative to the borrower to taking a conventional loan from a bank. This is a sort of lending online platform where loans can be taken and paid back along with the arranged rate of interest. RBI is the regulatory authority for Peer to Peer lending license. P2P lending is a lending system without involving any bank or any other financial institution lender.
What is Peer to Peer Lending License?
Peer to Peer lending, a technology-driven system, is a much easier lending platform than Non- banking Financial Companies (NBFC) and Banks. Peer to Peer lending provides borrowers with a solution to take a loan for a short term requirement. The short term requirement can be to buy consumer electronics and medical emergency repays credit card dues or business loans.
It’s a form of crowdfunding used to raise loans for people who need to borrow from those interested in investing their money.
It empowers an individual or any legal body to lend or borrow money without any financial institution or bank engaged in the process of lending as a negotiator.
Peer to Peer lending also broadens credit borrowers who were not able to get a loan through conventional financial institutions.
At such a platform, both borrower and lender seek benefits. The investor gets higher interest by giving their money as a loan instead of saving it, and for the borrower, it’s easy to obtain funds at a moderately low-interest rate.
What are the features of Peer to Peer Lending License?
The following are the features of Peer to Peer lending Platform:
Peer to peer is a completely online platform connecting the borrowers with the lenders.
At the P2P platform, there is no such need of developing a relationship between lender and borrower before the lending and borrowing process.
One of the P2P lending's best features is that there is no involvement of financial Institutions or intermediaries between the borrower and the lender throughout the process.
Further, the borrower and lender have their terms and conditions, having the flexibility to choose investments and borrowing, respectively.
Forms of Peer to Peer Lending
Types of Peer to Peer Lending Model
Consumer Lending
Loans for cars/weddings/holidays/home repairs/repayment of credit card dues are readily available.
Property Lending
This is made sure about Peer to Peer loaning against the first charge of the private property or business. The credit is acquired for individual home loans, Residential restoration, creating commercial loans and Buy-to-lets. Although this model is not popular in India.
Small Business Lending
Small businesses request for Small and Medium Enterprises (SME) loans because of the following reasons:
Business Expansion
Working Capital
Asset Finance
What are the Benefits of Peer 2 Peer Lending License?
For Borrowers
Low-Interest Rates
The borrowers can profit from the advantages of low loan costs when contrasted with banks and credit cards. At times a decrease of about 35% has been seen.
Fixed-Rate of Interest
P2P lending platform supports the fixed rate of inters even on encountering cases of late payment. Hence, many borrowers find this platform an attractive and beneficial option to go with.
Fast Processing of Application
Since Peer to Peer lending is done on the digital platform, it makes the whole transaction fast and simple.
Lower Fees
P2P lending platforms charge low fees.
For Lenders
Higher Returns
By and large, the profit of the investor is higher, contingent on the kind of attempted risk.
Direct Communication with Buyer
The stage offers the lenders an alternative to speaking with borrowers legitimately and concludes their arrangement with them.
Diversification
Investors are flooded with a variety of options to invest their capital.
Procedure for Obtaining Peer to Peer Lending License in India
Any business unit whether a Public Firm or Private Firm is eligible to commence the business of Peer to Peer lending. To begin, an applicant needs to apply to the Reserve Bank of India for the Peer to Peer lending license. For this, an applicant needs to fulfil the following:
An organization ought to be registered in India as a Public Limited Company or Pvt. Ltd. Company with the main objective of financing;
Mobile/Website App Work Flow
Least net possessed assets of INR 2 crores.
The online application is accessible on the Reserve Bank of India's web site (COSMOS).
Accommodation of printed copy of the application alongside joined documents will be submitted to RBI Office.
The permit will be allowed simply after a watchful review of the application and documents connected with it.
Conclusion
Peer to Peer lending, a technology-driven system, is a much easier lending platform than Non- banking Financial Companies (NBFC) and Banks. Peer to Peer lending provides borrowers with a solution to take a loan for a short term requirement. RBI is the regulatory authority for Peer to Peer lending license.