P2P – Peer to Peer Lending license has revolutionized the way of credit facilitation by inculcating advanced IT infrastructure which is thoroughly encrypted and easy to update. It seeks to broaden the credit accessibility for diverse borrowers by bringing practically innumerable lenders on its platform. Ease of use, seamless filterings, zero red tapism, and prompt assessment are some frontline benefits of this disruptive platform. Opening the P2P platform requires adherence to various legal requirements, including securing a Peer to Peer Lending license from the RBI.
Underlining the Significance of Peer to Peer Lending license
From small loan seekers to individuals looking for significant capital to launch a new venture, the P2P lending platform caters to diverse borrowers no matter their requirements or risk appetite. In a nutshell, the P2P lending platform has simplified the overly complicated credit disbursement process by eliminating redundant tasks that translate to high cost and elevated turnaround time- thanks to cloud technology and advanced IT infrastructure.
By leveraging cloud technology and advanced IT infrastructure, the P2P lending platform ensures prompt facilitation of credit to diverse borrowers without the need for any intermediary. This helps them grant debts in no time without sacrificing the necessary inspection.
Apart from rendering small to moderate loans, the P2P platform also helps entrepreneurs avail of significant capital depending on their business potential and risk appetite with minimal paperwork and low turnaround time.
Another major benefit that the P2P platform renders is zero intervention intermediaries which used to be an indispensable part of traditional banking. They used to charge hefty processing charges and take significant time owing to stringent processing and paperwork.
Course of actions served by the P2P lenders
As per the Reserve Bank of India;
- A P2P lender can only serve as the role of intermediary; one which connects borrowers with lenders.
- A P2P lender can only store and process data to fulfil the principal business.
- A P2P lender cannot deviate from underlying objectives and rules set by RBI.
- A P2P lender cannot raise deposits in any circumstances.
- A P2P lender cannot ensure credit facilitation on its own.
- A P2P lender cannot secretly board any lender without the RBI’s consent.
- A P2P lender cannot accumulate or hold funds coming from lenders and borrowers.
- A P2P lender cannot allow the influx of cross-border funds.
- A P2P lender must perform a thorough vetting of lenders and borrowers before getting them aboard and letting them use the services.
Underlining the mandatory documents for Peer to Peer Lending license
- Company registration (based on the chosen legal structure).
- Charter documents such as MoA and AoA.
- The balance sheet of the company (audited ones).
- Document reflecting the company’s net worth.
- Financially viable and pragmatic business plan.
- A declaration reflecting that active directors comply with “Fit and Proper” criteria.
- Website source code.
Eligibility Criteria for securing Peer to Peer Lending license
The following are the eligibility criteria for obtaining a Peer to Peer Lending License in India:
- The applicant firm must have a company registration such as an incorporation certificate in place under the Companies Act 2013.
- The threshold of NOF (Net Owned Funds) should not be less than Rs 2 crores.
- The firm must be incorporated as an NBFC.
- The firm must have the required entrepreneurial and technological resources.
- The availability of a P2P lending platform portal is mandatory.
- Submission of a financially sound business plan is vital.
- Balance sheets should be free from transactions appearing to be initiated from lenders and borrowers.
How to Secure Peer to Peer Lending Licence?
Post meeting the above criteria, the company can secure in-principle approval from the RBI for establishing a Peer to Peer Digital Lending platform. The platform shall attract some operational norms imposed by RBI and hence adherence to the same is vitally important. The said approval shall remain valid for 12 months from the date of issuance.
The licensee must implement its technology mechanism within the given timeline. Upon the completion of the given timeline and meeting the required conditions, the applicant needs to furnish some legal documents to the RBI.
In response, the apex bank shall perform thorough vetting and determine whether or not underlying guidelines have been met. If the RBI couldn’t find any discrepancy, they will grant the Certificate of Registration (COR).
Conclusion
The Peer to Peer Lending license is a mandatory requirement to make a P2P lending platform operational in India. Since this licence is governed by RBI, the applicant will come across an overwhelming number of compliances and paperwork. That’s where Adviso comes into play. With our expert guidance, you can seamlessly navigate the intricate landscape of RBI norms and secure the licence with minimal turnaround time.
