P2P lending: Direct selling agents may come under RBI regulatory ambit as NBFCs

| Updated on: Jan 10, 2018


The Reserve Bank of India’s recent move to regulate peer-to-peer (P2P) lending platforms as non-banking financial companies (NBFCs) has created a grey area of sorts, spelling trouble for thousands of direct selling agents (DSA) or direct marketing agents (DMAs).

The Finance Industry Development Council (FIDC) says it is “very much possible” that DSAs/DMAs who have been providing loan facilitation (offline) services to retail and corporate borrowers, from banks and NBFCs (with whom they have signed a written contract) for the past many years, may also fall under the ambit of RBI’s P2P regulatory framework as NBFCs.

This is going by the way RBI has worded the notification, FIDC Chairman Raman Aggarwal told BusinessLine here. FIDC is a self-regulatory body representing asset-financing NBFCs.

“The apprehension is that DSAs/DMAs (only if they are corporates) may also be defined as NBFCs and subjected to regulation by RBI. This would then require such DSAs/DMAs to have a minimum capital of ₹2 crore, adhere to KYC norms, anti-money laundering norms etc. This needs clarification,” he said.

It may be recalled that the RBI recently announced that a non-banking institution that carries on ‘the business of a peer-to-peer lending platform’ will be treated as an NBFC.

Key requirements

The RBI’s notification had explained the meaning of the term “the business of a peer-to-peer lending platform” under three key essential requirements, said Aggarwal. First, there should be providing of the service of loan facilitation under a contract. Second, it states “via online medium or otherwise,” which means it could be an online or offline service (both are included). Third, the participants should have entered into an arrangement with that platform.

“If you take all these together, there is a possibility of DMAs/DSAs (ones operating as corporates) dealing with P2P lending falling under the RBI’s regulatory ambit as NBFCs,” he said.

Non-corporate P2P lenders

Aggarwal further said the latest RBI notification seeks to regulate P2P lending platforms as NBFCs only if they are registered as corporates under the Indian company law. As such, all non-corporate P2P lenders still remain outside the ambit of regulation.

The regulatory framework for P2P lending platforms will have to be different, he added.

“P2P lending platforms treated as NBFCs may have to be subject to a different set of regulation. Provisions such as transfer of 20 per cent of their net profit to a reserve fund every year, prudential norms on asset classification (NPAs), income recognition and provisioning under the current regulatory framework prescribed for NBFCs may not fit or gel with the business model of P2P lending platforms, since they are mere facilitators and not lenders,” he said.

Published on September 24, 2017
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