Reserve Bank of India is Actively Studying Peer to Peer Lending

Like the rest of the world, India is moving forward with new forms of finance. Last month, the Securities and Exchange Board of India stated it would reveal crowdfunding norms “soon”.  Now at a conference taking place in Mumbai, R. Gandhi, deputy governor of the Reserve Bank of India (RBI), disclosed they were researching peer to peer lending and will publish a document regarding online lending soon.

As quoted in LiveMint, Gandhi stated; R Gandhi

“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 detail 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 if the economy so requires them.”

NBFC’s refers to non-banking financial companies.  Today in India there are more than 30 peer to peer lending platforms in operation.

Regulators around the world have struggled to define the new type of online lender. In the UK, where P2P originated, the FCA has worked hand in hand with platforms to get it right. In the US online lenders that allow retail investors to participate must manage diverse financial laws in each individual state. In China, the largest peer to peer market in the world, regulators have been hesitant to aggressively regulate the industry in light of flagging economic growth and the need for access to capital for SMEs.  At the end of last month regulators announced new rules which are expected to clamp down on the many online lenders many which have operated without proper managerial oversight.

India is the 2nd largest country in the world by population and the 7th largest economy by nominal GDP. The economy is developing rapidly but remains challenged by widespread economic disparity and social issues.


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