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Safeguards by RBI for InvestorsWhile no investment is 100% risk-free, P2P lending is a safer option for the investors owing to the following factors
01 Consistancy with net-worth
The aggregate exposure of a lender to all borrowers at any point of time, across all P2Ps, shall be subject to a cap of Rs. 50,00,000/- (Rupees Fifty Lakhs) provided that such investments of the lenders on P2P platforms are consistent with their net-worth
02 Capping on aggregate loans
The aggregate loans taken by a borrower at any point of time, across all P2Ps, shall be subject to a cap of Rs 10 lakh.
03 Limit on Exposure of a single lender
The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000.
04 Loan Maturity period
The maturity of the loans shall not exceed 36 months
05 Fund Transfers via Escrow Accounts
All the fund transfer between participants is to take place through escrow accounts operated by a bank promoted trustee.
06Know interest rates
The interest rate should be in annualized percentage rate format.
How Safe is it to Invest Money in Peer to Peer Lending?
While no investment is 100% risk-free, P2P lending is a safer option for the investors owing to the following factors:
RBI is regulating the sector to protect the interests of all stakeholders – lenders, borrowers, and P2P lending platforms. The P2P lending companies are required to submit regular performance reports to RBI. The Reserve Bank of India in its latest move on 22, November 2019, has enhanced the exposure limit enforced on investors in peer-to-peer lending platforms to ₹50 lakhs in place of only ₹10 lakhs previously. This definitely comes as an affirmative attempt to give the sector enough scope to grow to its full potential.
Fund transfer between the participants on the Peer to Peer Lending Platform shall be through escrow account mechanisms which will be operated by a trustee which is mandatorily promoted by the bank maintaining the escrow accounts. All fund transfers shall be through and from bank accounts and cash transaction is strictly prohibited.
Risk DiversificationP2P Lending works on the principle crowd-funding. Instead of lending money online to one single borrower, the P2P lending platforms disburse your investment amount between multiple borrowers. This diversifies your risk in case a few of the borrowers default.
Borrowers’ Profile VerificationThe peer-to-peer lending companies in India do an internal credit evaluation to verify Borrowers’ personal, professional, and financial information digitally. They assess the creditworthiness of the borrowers and take care of the documentation. Hence, you are saved from the trouble of conducting due diligence on your own, which may not be possible due to a lack of or limited resources.
TransparencyAll the communication between the borrowers and lenders happens online through the P2P lending site. You can get continuous updates on how your money is being invested. Hence, there is complete transparency in the entire process.
Peernet Technologies India Private Limited
406, Goyal Trade Centre, Shantivan, Borivali East,
Mumbai - 400066