P2P to get green light in India?
Alternative finance continues to spread across the globe, with the Reserve Bank of India (RBI) revealing it is actively researching peer-to-peer (P2P) lending and that it will publish a document on online lending soon.
The announcement follows a statement from the Securities and Exchange Board of India last month, indicating that it would publish crowdfunding norms “soon”.
RBI Deputy Governor, R Gandhi, disclosed the move at a conference in Mumbai last week, stating: “RBI is actively studying the peer-to-peer lending arrangements that are slowly gaining traction. While recognising the need for innovative products and services, we should be conscious of the risk emanating from such services. Based on a detailed study we intend to bring out a discussion paper for public consultation. RBI is aligned to the developmental needs of the economy and therefore will continue to approve of new types of NBFCs [non-banking financial companies] if the economy so requires them.”
There are over 30 peer-to-peer lenders operating in India.
P2P lending originated in the UK, with the Financial Conduct Authority (FCA) working hand in hand with lenders to get the regulatory regime for the new sector right. In the US, online lenders allowing retail investors to participate are obliged to navigate financial laws that vary state-by-state.
China has the biggest peer-to-peer lending market in the world and has been hesitant in aggressively regulating the industry due to a slowing economy and small and medium-sized enterprises (SMEs) needing access to finance.
India is the seventh largest economy in the world by nominal gross domestic product (GDP), but while its economy is developing rapidly widespread disparity remains.