P2P lending: P2P startups look to overhaul biz, processes amidst RBI crackdown

Peer-to-peer lending startups are looking to source business through their physical networks and overhaul their investment and withdrawal system, as they attempt to adhere to the Reserve Bank of India directions issued on August 16.

Fintech platform Mobikwik, which runs Mobikwik Xtra in partnership with Lendbox, has mandated that all withdrawals will be done on the 12th of every month and said the proceeds will be credited to the investor’s bank account in three working days.

While BharatPe has stopped the P2P lending product, Cred has put all new investments on hold.

Other platforms like Faircent have mostly switched to offline channels to source investors and borrowers, working with investment advisors across the country.

“Platforms can never be 100% compliant because they cannot settle funds on a T+1 basis which the RBI wants,” said a senior industry executive on the condition of anonymity. “Currently the work is going around achieving at least 80-90% compliance with the reviewed directives.”

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T+1 means repayments happening from the borrower needs to be credited back to the lender within the next working day.This comes at a time when the RBI has initiated penal action against P2P lending startups after most of them were found violating the regulations. Two companies, Liquiloans and Lendenclub, were fined around Rs 1.9 crore each on August 23 for violating P2P lending rules. On Wednesday, Mint wrote that show-cause notices had been served on other P2P platforms like Faircent, Lendbox and RangDe as well. The RBI revealed this information in its reply to a Right to Information filing made by AltInvestor founder Yash Roongta.

Roongta told ET that the RBI did not disclose much details in the response but confirmed that it had sent notices to four other companies.

Industry insiders told ET that the RBI has raised questions around secondary market access given to P2P investors which facilitated instant withdrawals. ET had written on March 22 that P2P lenders had stopped instant withdrawals of funds fearing regulatory backlash.

After the August 16 RBI notification, the P2P industry which was growing fast on the back of partnerships built with large consumer facing apps like Mobikwik, BharatPe and Cred, faced a major business slump.

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“Our investors are facing difficulty in adjusting to the new rules; we are having to go back to each one of them to address their queries. The product market fit which we had found has gone for a toss,” said another founder of a P2P lending startup.

Industry insiders chose to speak in background since the RBI is scrutinising the sector closely.

Another founder told ET that there have been attempts to reach out to the regulator for clarifications and to show the industry stand, but not much has moved beyond that.