RBI seeks data on volume drop from P2P players post new rules

The Reserve Bank of India (RBI) has reached out to Peer-to-Peer (P2P) lending platforms to gather data on loan disbursements since implementing its new regulations. Aiming to assess the impact of these changes, the central bank has sent a questionnaire to P2P platforms, requesting detailed information on loans issued since August 17.

“This is not part of the standard reporting process. The RBI has specifically asked for the volume of disbursements—loans given out—since August 17, the day after the new rules were announced. This survey will shed light on the industry's current position in terms of business growth or decline post-August 16,” said an expert from the industry, who chose to remain anonymous.

More than a month has passed since the new regulations took effect, and the P2P lending sector is facing significant challenges in adjusting. Many platforms have reported a sharp drop in business, with some experiencing as much as a 90% reduction in transaction volumes. This significant decline reflects the difficulties P2P platforms are encountering under the revised regulatory framework.

“The value of loans disbursed is the key measure of business activity. If fewer or no loans are issued, it means platforms are either struggling to attract or manage new funds from lenders. Volumes for the entire industry from August 17 to September 30 are expected to be very low,” the industry expert added.

P2P lending connects individuals with borrowers through RBI-regulated non-banking financial companies (NBFCs). However, the new regulations have increased operational costs, leading some platforms to reconsider their future. "Transaction costs have soared. Previously, we could process lump-sum payments, but now we must disburse funds for each borrower on a T+1 basis, raising costs significantly. The model is becoming unsustainable, and many players, including us, are thinking of exiting," said the founder of a major P2P platform.

The RBI's updated guidelines, introduced on August 16, 2024, require that funds in escrow accounts be transferred within one business day (T+1), adding administrative burdens. Additionally, repayments, previously done in lump sums, must now occur monthly. Lenders must manually select borrowers, making the process even more cumbersome under the T+1 rule, say industry players.

Moreover, the new regulations have banned lender-to-lender transactions, eliminating secondary market loans and further reducing liquidity.