Is RBI sleeping over Faircent's P2P ad that promises huge returns?
Moneylife Digital Team 17 March 2018
An overhyped, front page advertisements in a leading economic daily by, which claims it is India's largest peer-to-peer (P2P) lending website, is luring people promising returns that are safer than the risky ’Sensex’ — almost like a Ponzi scheme. Shockingly, the company’s business and its puffery does not seem to attract the attention or supervision of any regulator. Not even the Reserve Bank of India (RBI), whose governor recently lamented that his organisation does not have adequate powers over banks — especially public sector banks. So what about finance companies that are regulated by it? The advertisement would give you a clue. The last line of the advertisement, in its fine print carries a disclaimer saying, the "Reserve Bank of India (RBI) should not be held responsible for these claims or promises".
The RBI governor, one may recall, has famously said that the Reserve Bank "cannot be in every nook and corner to prevent fraud”, so we thought we would draw the RBI’s attention to’s advertisement which seemed to lure people into a highly risky and investment in order to further fund small businesses. The RBI’s response was to curtly direct us to its Master Directions issued on 4 October 2017 and modified on 9 November 2017 and 23 February 2018. The RBI official asked us to refer to Para 12(2) in particular in the Master Directions.
This is listed under Fair Practices Code. Para 12(2) that we dug up on the net: "Non-banking financial company (NBFC)-P2P shall be required to obtain explicit affirmation from the lender stating that he/ she has understood the risks associated with the proposed transaction and that there is no guarantee of return and that there exists a likelihood of loss of entire principal in case of default by a borrower. {subscription_div} The platform shall not provide any assurance for the recovery of loans. Further, the platform shall display a caveat that 'Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by the NBFC-P2P, and does not provide any assurance for repayment of the loans lent on it’."
How is an ordinary person lured by the advertisement supposed to know any of this, when they are clueless about peer-to-peer (P2P) lending? And should the regulator stand by and let it go? There are three issues with the Faircent advertisement. It promises 18% to 25% annual returns, and monthly income. Secondly, there is a disclaimer in the name of Reserve Bank. And lastly, it tries to grab eyeballs with 'Sensex aap ke sapne phir le dooba?"
Interestingly, Faircent is registered with RBI as Fairassets Technologies India Pvt Ltd ( This means entire responsibility for the content in the advertisement should be that of Faircent. Is it enough for a company to have a vague disclaimer in its fine print, when another financial regulator — the Securities and Exchange Board of India (SEBI) — demands a very explicit disclaimer even from the highly regulated mutual fund industry (past performance is no guarantee of future returns)? In the case, or others in this business, there is nothing to back the claim of returns even as a comparison or past performance.  
In fact, the use of Reserve Bank’s name in the disclaimer appears to suggest that the caveat at least has the regulator’s okay. This is like Ponzi operators showing registration certificates from Ministry of Corporate Affairs (MCA) to claim that they have government approval for their schemes. Faircent says it helps in eliminating the high margins, which intermediaries make on our transactions. At, people who have spare money lend it directly to people who want to borrow, the P2P platform says.
When asked, an official replied that the Bombay Stock Exchanges (BSE) "will take appropriate legal action" for the disparaging reference its benchmark Sensex and equity investment in general by Faircent.
4 years ago
Article makes no sense. If you want to be protected against your own carelessness by a regulator, I hope you learn better.
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