NBFC P2P Lending Registration

P2P Lending stands for Peer-to-Peer lending. The term “Peer to Peer Lending Platform” means an intermediary providing the services of loan facilitation via online medium or otherwise, to the participants. Participant means a person who has entered into an arrangement with an NBFC-P2P to lend on it or to avail of loan facilitation services provided by it. NBFC P2P Platform is a Non-Banking Financial Company providing services of loan facilitation to interested individuals or businesses through online portals. An individual or financial institution can become a lender at P2P lending and earn interest paid by the individual or business who has borrowed money. P2P Lending operates completely online and serves to connect such lenders and borrowers. An individual who is interested to invest his money somewhere else lends the same (lender) to the individual who is in need of money(borrower) through P2P Lending Platform.

Emergence Of Peer To Peer Lending:

A result of the greater shift towards digitalization of transactions is, the peer-to-peer lending sector has started growing in India. This sector has been brought under the regulatory framework of the Reserve Bank of India (“RBI”) under the wing of NBFCs. The digitally backed NBFCs are assessing the borrowers’ creditworthiness online and delivering almost instant credit with little or no paperwork, transparency in their offerings and great customer service which is a significant upgrade from the earlier experience.

Eligibility Criteria For Becoming An NBFC P2P:

Documents Required for NBFC P2P Lending Registration

the details of the software/ hardware proposed to be set up by the applicant
Road map giving the timeline by which the IT infrastructure can be set up.
Brief of the business model to be adopted
Proposed process for participant authentication
The procedure to be adopted for documentation of loan agreements.

Scale Based Regulation(Sbr); A Revised Regulatory Framework For NBFCs:

To tighten strict control over NBFCs, RBI has prescribed Guidelines on Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs on 22nd October 2021 which will be effective from 01st October,2022. NBFCs shall be categorized into Four Layer Approach i.e Base Layer, Middle Layer, Upper Layer and Top Layer. NBFC-Peer to Peer Lending Platform (NBFC-P2P) shall be covered under the “Base Layer” Category. RBI has also brought changes in regulatory Net Owned Fund for NBFC-ICC, NBFC-MFI and NBFC-Factors which shall be increased to Rs 10 Crores. But for NBFC-P2P, NBFC-AA, and NBFCs with no public funds and no customer interface, the NOF shall continue to be ₹2 crore.

Procedure of NBFC P2P Lending Registration:

Sr. No.	PARTICULARS	PROCEDURE
1.	APPLICATION	An application is required to be made by the Company for registration as NBFC P2P to the Department of Regulation, Mumbai of the Reserve Bank of India in the form as may be specified.
2.	CONDITIONS TO BE FULFILLED FOR THE PURPOSE OF CONSIDERING APPLICATION FOR REGISTRATION	a. The Company must be incorporated in India; b. The Company must have necessary technological, entrepreneurial and managerial resources for offering services to the users of Peer-to-Peer Lending Platform; c. The company must have adequate capital structure to carry on the business of Peer-to-Peer Lending Platform; d. The Promoters and the Directors of the company are fit and proper; e. General character of the management of the Company must not be prejudicial to the public interest; f. The Company must submit a plan or implement a robust and secure Information Technology system; g. The Company must submit a viable business plan for undertaking the business of Peer-to-Peer Lending Platform; h. Public Interest must be served by the grant of Certificate of Registration; i. Such other conditions as may be specified by the Bank
3.	IN PRINCIPLE APPROVAL:	i. After fulfillment of the following conditions, Bank may grant in-principal approval for setting up of a Peer-to-Peer Lending Platform, subject to such conditions which it may consider fit to impose. ii. The validity of the in-principal approval shall be 12 months from the date of granting such in-principal approval. iii. The company shall put in place the technology platform, enter into all other legal documentations required and report position of compliance with the terms of grant of in-principal approval to the Bank within the period of twelve months. iv. The Bank, after being satisfied that the entity is ready to commence operations, grant a Certificate of Registration as NBFC-P2P, subject to such conditions as it may deem fit by the Bank.

Reasons Of Growing Opportunity Of P2P NBFC In Flourishing Indian Market:

Make Loan procedure easy
Lower Cost of Borrowing
Easy Funding to Micro and Small Sized Enterprises
Less Paperwork
Direct Negotiation between Lender and Borrower

Reporting Requirements:

The Bank may, from time to time, prescribe return/s to be submitted by NBFC-P2P, as it deems fit.
The following quarterly statements shall be submitted to the aforesaid Regional Office within 15 days after the quarter to which these relate.
- A statement, showing the number and amount in respect of loans;
  - disbursed during the quarter;
  - closed during the quarter; and
  - outstanding at the beginning and at the end of the quarter, including the number of lenders and borrowers outstanding as at the end of the quarter
- The amount of funds held in the Escrow Account, bifurcated into funds received from lenders and funds received from borrowers, with credit and debit summations for the quarter.
- Number of complaints outstanding at beginning and at end of quarter, and disposed of during the quarter, bifurcated as received from
  - lenders and
  - borrowers.
- The Leverage Ratio, with details of its numerator and denominator.

Cancellation Of Certificate Of Registration:

The Bank may cancel the CoR granted to an NBFC-P2P, if such company –

ceases to carry on the business of Peer-to-Peer Lending Platform in India; or
has failed to comply with any condition subject to which the CoR has been issued to it; or
is no longer eligible to hold the CoR; or
at any time fails to fulfill any of the conditions referred to in paragraphs 5(2)(ii) and 5(2)(v); or
fails to –
- comply with any Direction issued by the Bank; or
- maintain accounts, publish and disclose its financial position in accordance with the requirements of any law or any Direction or order issued by the Bank; or
- submit or offer for inspection its books of account or other relevant documents when so demanded by the Bank.

Frequently Asked Questions

What is the meaning of the word ‘person’ mentioned at para 4(1)(iv) of the NBFC-P2P Directions, 2017? Would it also include banks/NBFCs?

For the purposes of para 4(iv) of the Directions, the term ’person’ shall include an individual, a body of individuals, a HUF, a firm, a society or any artificial body, whether incorporated or not.

Would electronic platforms serving as Direct Service Agents (DSA)/ Business Correspondents for banks and/ or NBFCs fall under the purview of the NBFC-P2P Directions?

Electronic Platforms that assist only banks, NBFCs and other regulated AIFIs to identify borrowers are not to be treated as P2P platforms. However, in cases where, apart from banks or NBFCs or AIFIs, other retail lenders use the platform for lending, the platform will have to register separately as an NBFC-P2P.

How is leverage defined in case of NBFC-P2P lending platform?

Leverage ratio refers to outside liabilities on the balance sheet of an NBFC-P2P Platform that it can raise divided by its owned funds. Customers’ funds lent/borrowed by using the platform is not reckoned as outside liability of the platform.

What is the meaning of Investible Funds?

Investible funds refer to capital infused in the business and surplus generated out of business of NBFC-P2P. It does not include funds of lenders and borrowers that flow through the escrow accounts. Customers’ funds lent/borrowed by using the platform cannot be utilised by the platform.

Do applicants of NBFC-P2P registration require to bring in NOF of Rs. 2 crores upfront at the time of making the application?

The applicant should give the list of promoters and the source of funds for the minimum capital of Rs 2 crore. The capital should be infused before issue of CoR. No change in promoters will be allowed in the interregnum.

Do applicants of NBFC-P2P registration require to bring in NOF of Rs. 2 crores upfront at the time of making the application?

ROLE OF COMPLIANCE CALENDAR LLP

“Master Directions – Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017” (“Directions”) were brought by RBI to regulate NBFC-Peer to Peer Lending Platform. Due to increase in online transactions and technological development, Peer to Peer Lending Platform is gaining importance. NBFC P2P has to comply with various regulatory norms and directions for which Compliance Calendar LLP has a team of experienced professionals who can provide you assistance and guidance with respect to NBFC Peer to Peer Lending Platform. If you are looking to register your Non-Banking Financial Company (NBFC) as P2P Registration, you are welcome to connect with us at info@ccoffice.in or call us at +91-9988424211 to book your one-time free consultation and we will be more than happy to help you out.

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