Regulatory norms for the globally popular peer-to-peer crowd-funding, under which large lenders and borrowers are matched on an online platform, will be in place within the next three months, a top finance ministry official has said.
One of the essential components of the government's stated measures to deepen the corporate bond market in India, the proposal is for web-based platforms that will bring lenders and borrowers together, instead of they having to go to banks, funding institutions or unorganised financiers, officials said.
"This was a part of the budget announcement. The Reserve Bank of India has a discussion paper on this as well. It will then come to us for consultation with their recommendations. Once this process is over, the guidelines will be issued," a senior finance ministry official told IANS.
"I think, it will be done in the next three-four months," the official said on condition of anonymity.
The proposed regulatory framework will cover permitted activities, the prudential regulations on capital, some governance issues, the business continuity plan of the platforms and customer interface, apart from mandatory reporting.
Among the measures announced by Finance Minister Arun Jaitley in the budget for this fiscal, the central bank was asked to create an enabling match-making e-platform for lenders and borrowers.
"The Reserve Bank of India will issue guidelines to encourage large borrowers to access a certain portion of their financing needs through market mechanism instead of the banks," the finance minister had said in the budget speech.
As per global practices, borrowers and lenders under peer-to-peer lending can either be an individual or a legal person. The interest rate is either set by the platform or by mutual agreement between the borrower and the lender.
Both the lender and the borrower pay a fee to the platform for the service, which includes preliminary assessment of the stakeholders' creditworthiness, collection of repayments and legal advice. This, according to experts, helps in keeping the cost of funds lower -- when compared with borrowings from banks or unorganised lenders.
According to the Britain-based Peer-to-Peer Finance Association, global lending via such platforms had grown from 2.2 billion pounds in 2012 to 4.4 billion pounds in 2015.
As regards India, the Reserve Bank has said there is no credible data on lending via such platforms, but quoted reports saying close to 20 online peer-to-peer lending companies had launched operations in the past one year, taking the numbers to 30.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.