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A Peer-to-Peer (P2P) Lending License allows entities to operate an online platform that connects individual borrowers with lenders for unsecured loans. The license ensures that the platform adheres to regulatory guidelines to protect participants and maintain financial stability. In India, P2P lending platforms are regulated by the Reserve Bank of India (RBI) under the Master Directions - Non-Banking Financial Company - Peer to Peer Lending Platform (Reserve Bank) Directions, 2017.
Key Features of a P2P Lending Platform:
Role of the Platform:
Acts as an intermediary between borrowers and lenders.
Facilitates loan agreements and repayments but does not participate directly in lending or borrowing.
Permissible Activities:
Matchmaking between lenders and borrowers.
Performing credit assessments and risk profiling.
Facilitating loan disbursement and repayment.
Providing services such as documentation, monitoring, and grievance redressal.
Prohibited Activities:
Lending on its own account.
Holding borrower or lender funds (transactions must occur through escrow accounts managed by a bank).
Eligibility Criteria for P2P Lending License:
Entity Type:
Must be a company registered under the Companies Act, 2013.
Capital Requirements:
Minimum net owned funds (NOF) of INR 2 crores.
Technology Infrastructure:
A secure, scalable, and robust IT system for managing platform operations and ensuring data security.
Fit and Proper Management:
The company’s directors and promoters should have a clean track record, financial competence, and no criminal history.
Business Model:
A clear, viable, and compliant business model for P2P lending operations.
Application Process for P2P Lending License:
Prepare Application:
Complete the prescribed application form available on the RBI’s COSMOS portal.
Documentation:
Submit the following documents:
Certificate of Incorporation.
Memorandum and Articles of Association specifying P2P lending as a primary activity.
Detailed business plan and revenue model.
KYC details of promoters, directors, and significant shareholders.
Financial statements and proof of NOF certified by a statutory auditor.
IT system details, including data protection and cybersecurity measures.
Grievance redressal mechanism.
Submit Application:
Apply online via the RBI’s COSMOS portal and send a physical copy of the application to the regional RBI office.
Review by RBI:
The RBI evaluates the business model, technology infrastructure, and compliance with guidelines.
Background checks on directors and promoters are conducted.
Approval and License Grant:
If all requirements are met, the RBI issues a Certificate of Registration (CoR), allowing the company to operate as an NBFC-P2P.
Post-Licensing Requirements:
Operational Restrictions:
Exposure limit per lender to a single borrower: INR 50,000.
Aggregate exposure of a single lender across the platform: INR 50 lakhs.
Maximum loan tenure: 36 months.
Escrow Account Management:
All funds must flow through escrow accounts operated by a bank with a trustee arrangement.
Data Security and Privacy:
Implement robust cybersecurity measures to protect user data.
Compliance and Reporting:
Submit periodic returns to the RBI, including financial statements, loan disbursement reports, and details of borrowers and lenders.
Grievance Redressal:
Establish a transparent mechanism to handle customer complaints.
Benefits of a P2P Lending License:
Legitimacy:
Operate as a regulated entity, instilling trust among users.
Market Potential:
Tap into the growing demand for alternative lending solutions.
Transparency:
Establish credibility by adhering to regulatory norms.
If you need help drafting your application, designing a business plan, or understanding the technology and compliance requirements for a P2P lending platform, let me know!