P2P lending is risky; investors must diversify their borrower profiles

Lenders get the benefit of monthly cash flows and control, but they must avoid platforms promising high returns

M Rajeshwar Rao, deputy governor at the Reserve Bank of India (RBI), recently flagged off the risks of lending on peer to peer (P2P) platforms at an NBFC (non-banking financial company) summit organised by the Confederation of Indian Industry.

“A large proportion of lenders on NBFC-P2P platforms are individuals and they are not well equipped to understand the risks involved in providing credit. Instead of educating the lenders about the inherent risks in the lending activity, NBFC-P2Ps have been observed to underplay the risks through various means, such as promising high or assured returns, structuring transactions, and providing anytime fund