RBI Directions

OxyLoans will apply for NBFC – P2P License as per the new RBI Directions.

The much-awaited Peer to Peer Lending directions have been issued by the Reserve Bank of India (RBI) on October 4, 2017, post the notification in the official gazette last month. The Directions provide a detailed framework for registration of P2P lending platforms as “Non-banking financial company – Peer to Peer Lending Platform” (NBFC-P2P), eligibility criteria, the scope of activities, prudential norms, operational guidelines, information technology/security, governance, disclosure and reporting requirements.

 

The key requirements contained in the Directions are:

 

NBFC – P2P registration

  • “Peer to Peer Lending Platform” has been defined to mean intermediary providing the services of loan facilitation via online medium or otherwise, to the participants
  • Existing P2P entities should apply within 3 months for Certificate of Registration and are allowed to continue carrying on the P2P business until disposal of the application by RBI
  • For other entities, applications will be processed through a two-stage approval – In-principle and final (Certificate of Registration). The final approval will be issued upon the applicant meeting all the prescribed conditions such as execution of legal contracts, putting in place the tech platform within the twelve months period (i.e. validity of the in-principle approval)
  • Along with the duly filled application form (yet to be prescribed), the applicant will have to submit its business plan, capital structure and the plan for robust and secure IT system to RBI

 
Key Eligibility criteria

  • Applicant to be an Indian company
  • Minimum net owned fund – INR 20 mn (i.e. INR 2 crores)
  • Fit and proper criteria for promoters and directors

 Permitted scope of activities  Prohibited scope of activities
  • Act as an intermediary
  • Undertake due diligence on participants
  • Undertake credit assessment and risk profiling of borrowers and disclose to lenders
  • Assistance in documentation of loan agreements
  • Assistance in disbursement and repayments
  • Provide recovery services on platform originated loans
  • Raising of deposits
  • Lending from its own books
  • Any credit enhancement / guarantee
  • Any facilitation of secured lending linked to its platform
  • Holding of funds on its own balance sheet
  • Cross selling except loan specific insurance
  • International flow of funds
  • Storage of all data on hardware located outside India


Key Prudential Norms

  • Leverage ratio not exceeding 2(Outside Liabilities /Owned Funds)
  • Aggregate exposure limit of INR 10 lacs per lender and per borrower at any point in time, across all P2P platforms
  • Single lender-borrower exposure limit of INR 50,000, across all P2P platforms
  • Loan tenure of maximum 36 months


Operational and other guidelines

  • Fund transfer through escrow mechanism and operated by a trustee (promoted by the bank). At least 2 escrow accounts to be maintained – one for the lenders and other for the borrowers.  Cash transaction is strictly prohibited
  • NBFC-P2P must become a member of all Credit Information Companies and submit data to them
  • Detailed requirements prescribed on transparency, disclosure, Fair Practices Code, grievance redressal mechanism
  • Establish rules and processes such as each lender approve each borrower loan, signing of loan contracts by participants, mandatory disclosure of certain information on website, etc
  • Board approved IT /Security  plan to be in place in accordance with prescribed guidelines on IT framework for NBFCs; Business Continuity Plan and reasonable arrangements to be in place, in case of closure/winding down of P2P platforms
  • Prior RBI approval with Public Notice required in case of change in control /ownership of P2P entity
  • Quarterly reporting and Information Security Audit by CISA Certified Auditors once in 2 years prescribed