P2Ps see rising customer interest ahead of T+1 deadline on November 14

User interest in peer-to-peer (P2P) lending platforms may be picking up pace, even as players initially feared major business disruption following the Reserve Bank of India’s (RBI’s) revised guidelines for such companies in August. 

 

P2P non-banking financial company (NBFC) lending platforms provide an online marketplace for participants in P2P lending, which includes individual lenders and borrowers. Individuals can view details about borrowers before lending them capital.

 

Companies noted that they are conducting pilots or have completed the implementation of the T+1 guideline ahead of the November 14 deadline, which mandates firms to clear funds in escrow accounts within one day.

 

“Compared to July, we are back to 60-70 per cent of our volumes. We believe that within the next one to two months, we should return to our original volumes before the guidelines that were enacted,” said Bhavin Patel, chief executive officer (CEO) and co-founder of LenDenClub, a P2P NBFC. He added that creditor participation in manual lending transactions rose three to four times between August and October.

 

In August, the RBI tightened its guidelines on P2P lending platforms, flagging regulatory violations by some entities. The RBI stated that some P2P lending platforms were promoting P2P lending as investment products, offering liquidity options, and functioning as deposit-takers and lenders, rather than merely acting as intermediaries. 

 

Despite continuity in business operations, companies are proceeding with caution citing investor re-education about new norms.  

 

“Interest in P2P lending is very much there as lenders have overall had a good experience with the product.  All platforms are educating lenders on their action timeline under the T+1 rule which will take some time,” said Neha Juneja, CEO of IndiaP2P, a P2P NBFC.

 

Firms believe they would later assess how well people understand the new norms after the revisions to the guidelines.

 

“There is capital coming in from both existing and new lenders. That concern is somewhat resolved. However, how effectively and cost-efficiently we can implement T+1 is still to be tested,” Juneja observed.

 

In its revised guidelines, the RBI mandated that funds transferred into the lenders’ and borrowers’ escrow accounts should not remain in these accounts for more than T+1 days, where T refers to the date on which the funds are received.

 

“On the borrower’s side, the T+1 mandate has been completely implemented. However, on the lender side, some lenders are taking more time to deploy the funds coming onto the platform,” Patel from LenDenClub added. 

 

For investments from lenders, companies have to process fewer transactions compared to repayments from borrowers, which must be processed daily based on transaction volume.

 

While firms are currently processing repayments weekly, they will be required to do so every day after November 15.

 

Despite the projected fivefold to sixfold increase in transaction processing costs due to the new guidelines, companies have submitted detailed cost calculations to the regulator, seeking potential relief from the T+1 settlement norms.

 

Meanwhile, companies indicated they may need to re-educate customers about their P2P products.

 

“There is a shift in the perception of the product, not because the product has changed fundamentally. It was a very new product a few years ago, and there was a lot of marketing and educational effort to make it popular, which now needs to be redone,” Juneja from IndiaP2P added.

 

P2P industry seeks RBI T+1 review

 

•          Firms cautious about early interest again, educating customers about new norms

 

•          Implementation of T+1 completed on lenders’ side; still to be done for borrower repayments

 

•          In August, the P2P lending industry association requested that the RBI reconsider its T+1 mandate for clearing funds in escrow account.