Peer To Peer Lending Lisence
                     
PEER TO PEER 
LENDING LISENCE
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PEER TO PEER LENDING
Peer to Peer (P2P) lending platform is basically an 
online platform to raise loans which are to be paid back 
with interest. The borrower may either be an individual 
or a legal entity. The online platform may set the 
interest rate to be charged on the loans or it may be 
decided mutually between the parties. P2P lending has 
been proved best for the startups & entrepreneurs to 
kick start their business as they need seed or venture 
funding. While if we talk about taking a loan from bank; 
it charges higher rate of interest. On this platform, 
entrepreneurs can easily borrow money from 
individuals.
In simple words, we can say that Peer to Peer (P2P) 
lending is a form of social lending under which 
individuals can lend or borrow money. There is no 
involvement of any financial institution, therefore, 
lenders are free to choose borrower. This concept of 
lending is gaining popularity among lenders as they get 
higher rate of interest.
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PEER TO PEER LENDING LISENCE
Peer to Peer lending is a method of debt financing 
under which individuals can lend or borrow money 
without the involvement of any financial institution 
as an intermediary. Peer to Peer lending 
companies is regulated by the Reserve Bank of 
India. They operate online involving low overhead 
cost. It is proving profitable for lenders as well as 
borrowers in such a way that lenders can earn 
higher rate of interest while borrowers can borrow 
at lower rate of interest.P2P lending platforms are 
technology driven companies which are registered 
under the Companies Act. They act as an 
aggregator between lenders and borrowers. On 
P2P lending platform, lenders and borrowers 
register themselves on the website. Thereafter 
P2P lending platform carries out due diligence and 
approve the applications for participation in 
lending/borrowing activity.
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For carrying out a P2P lending business, one has to obtain 
license from the Reserve Bank of India. For obtaining a P2P 
lending license, a proper application is filed with the 
authority along with the necessary documents by the 
expert professionals. Enterslice has a team of 
professionals who have expertise in this field, so if you’re 
interested in obtaining P2P lending license then you can 
contact us.
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CHARECTERISTICS OF PEER TO PEER LENDING
P2P Lending model is revolutionizing the global financial market and reshaping the 
financial industry from past few years by introducing new innovative modules and lending 
services.
Custom designed P2P lending platform is the best alternative in comparison to old-style 
exercise of borrowing money from banks as banks take long time to approve loans. Instead 
of approaching banks and applying for loans, P2P lending platforms can be used, where we 
only need to provide necessary information from sitting at home/ office and within hours 
our loan will be processed and approved.
The following are the charecteristics:
1. P2P Lending platform involves online transactions,
2. Prior relationship between lenders and borrowers is not necessary,
3. On P2P platform, lenders can freely choose borrowers to invest in,
4. No direct intermediary negotiating interest rates or amounts.
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PROS AND CONS OF PEER TO PEER LENDING PLATFORM
PROS FOR BORROWERS CONS FOR BORROWERS
1.     Low-Interest Rates: The borrowers can avail the 1. In comparison to banks, it 
benefits of low interest rates as compared to banks 
and credit cards. In some cases reduction of about involves low amount of 
35% has been witnessed. loan.
2. Fixed Rate of Interest: This type of platform 
provides the leverage of fixed rate of interest even 2. Less Security
in the case of late payments, thereby, it acts as a 
lucrative option in the hands of the borrower.
3. Sometimes borrowers are 
3. Simple and Fast Processing of Application: the more than lenders
customers are provided with exclusive digital 
experience of facilitating rapid flow of transactions.
4. Lower Fees: the platform charges lower fees as 
compared to other modes of finances. Moreover, 
no penalty is attracted to pre-payment.
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PROS FOR LENDERS CONS FOR LENDERS
1. Higher Returns: Generally,the 1.  Whether the credit rating 
returns offered to the investors assessment done by the platform is 
are higher, depending upon the reliable or not, is a concern. 
type of risk you undertake. Therefore the risk associated is not 
certain.
2. Diversification: Forinvestors, 
there is a wide variety of options 2. With the P2P industry still in its 
available to put their capital nascent stage, it would be too early 
into. to reach a definitive conclusion.
    Direct Communication with the 3. Returns are lower in comparison to 
publicly traded index fund.
3. Buyer: the platform provides the 
lenders an option to directly 
communicate with borrowers and 
finalizes their deal with the 
borrowers.
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REGULATORY FRAMEWORK OF PEER TO PEER LANDING
While most of the crowd-funding- be it, 
equity, debt or fund based, fall under the 
purview of the capital market regulator-
SEBI, the P2P lending is regulated by 
Reserve Bank of India. Different 
jurisdictions of the world treat P2P 
lending differently. In some countries, 
they are identified as banks while in 
other countries, they are treated as 
intermediaries. This drags us into 
understanding the global scenario 
circumventing the P2P lending across 
the world.
Here are the five ways in which P2P 
lending has been regularized globally 
mentioned in consultation paper 
released by RBI
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Regulatory Regime Description Countries Currently Using the 
Regime
Exempt market/ Unregulated through In these jurisdictions, either the regulation China, Ecuador, Egypt, South Korea, 
lack of definition has classified P2P lending as an exempt Tunisia
market or there is a lack of definition in 
legislation. However, in some cases, there is 
regulation designed to protect borrowers and 
that mainly involves rules already in place to 
protect the borrower from unfair interest 
rates, unfair credit provision and false 
advertising.
Intermediary Regulation This regulates P2P lending platforms as an Australia, Argentina, Canada 
intermediary. It usually requires registration (Ontario), New Zealand, United 
as an intermediary, and other regulatory Kingdom
requirements depending on the jurisdiction.
Banking Regulation This regulates P2P lending platforms as banks France, Germany, Italy
due to their credit intermediation functions 
and is therefore regulated as banks. 
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US Model There are two levels of regulation, United States of America
Federal regulation through the 
Securities and Exchange Commission 
(SEC) and State level, where 
platforms have to apply on a state-
by-state basis. One level below the 
federal requirements is state 
regulation. Some states outright ban 
the practice of P2P lending (e.g. 
Texas). Other states place limits on 
the type of investors using the 
platforms to lend (e.g. California). In 
addition, if a platform wishes to 
operate across multiple state 
boundaries, it must apply to each 
state separately.
Prohibited P2P lending is banned under Israel, Japan
legislation.
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PEER TO PEER LENDING IN GLOBAL 
SCENARIO
• In countries such as Israel and Japan, the 
P2P lending is completely prohibited. 
Certain countries such as Australia, 
Canada, UK treat them as the financial 
intermediaries.
• In China, Egypt, South Korea, P2P lending 
is not regulated and is considered as the 
exempt market due to the lack of 
definition
• The P2P lending is treated under the 
Banking Regulation in the countries such 
as France, Germany, and Italy.
• In the United States, the concerned is 
treated in the dual phase-one at the 
central level and other at the state level.
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SCOPE OF ACTIVITIES UNDER P2P
The P2P lending platforms are the Fintech Companies 
registered under the Companies Act. They help in creating 
the match between lenders and borrowers. After 
registering the borrower within itself, the platforms 
perform the task of their credit assessment. Only those 
candidates, who fulfill the due diligence test with the 
platform are allowed to take part in the borrowing and 
lending process.  Even the documentation for the lending 
and borrowing is facilitated by the online portal.
Following are the scope of activities:
• Act as an intermediary
• P2P lending platform is not permitted to lend on its own
• Not permitted to arrange credit 
enhancement/guarantee
• P2P lending platform do not possess the power to 
permit any secured lending.
• Any other financial product cannot be sold
• International flow of funds cannot be permitted
• It is mandatory to adhere all applicable legal norms
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DIFFERENCE BETWEEN P2P & BANKS
BASIS BANK PEER TO PEER LENDING
Duration Banks takes longer time to Faster Processing of Loan as 
sanction a loan due to in there are less stringent rules
depth verification of 
applicant’s financial 
background
Product Standardized lending products A customized solution is 
are offered to its customers provided to customers on the 
basis of their profile
Approach Closer look of credit score A data-driven approach is used 
for lending
Rules & Stringent rules and Flexible rules & regulations 
Regulations regulations as there is an therefore risk associated with 
involvement of proper credit P2P is not certain
rating assessment
Loan Loan amount can be higher Limitation on the loan amount 
Amount (Maximum Rs. 10 lakhs/-)
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ELIGIBILITY TO OBTAIN P2P LISENCE
1.  A company registered in India;
2. Applicant must possess technological, 
entrepreneurial and managerial resources;
3. In order to carry out P2P lending platform, an 
applicant must have adequate capital 
structure;
4. Proposed Directors must fulfill the fit and 
proper criteria
5. There must be a proper plan for efficient 
Information Technology System
6. A viable Business Plan
7. Motive to serve in public interest
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PROCEDURE FOR OBTAINING P2P LISENCE
Any entity desirous of commencing the business of P2P 
lending  and registered as a Private Limited Company or 
Public Limited Company can apply to RBI for the P2P 
license. For this, they have to fulfill the following:
1. Company should be registered in India as Private 
Limited Company or Public Limited Company with the 
principal objective of financing;
2. Minimum net owned funds of INR 2 crores.
3. Website / Mobile App Work Flow
4. The online application is available on RBI’s website 
(COSMOS).
5.  Submission of hard copy of the application along with 
attached documents shall be submitted to RBI Office.
6. The license will be granted only after vigilant inspection 
of the application and documents attached with it.
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PEER TO PEER AND CROWD FUNDING
In India, Peer to Peer lending is a form of crowd-funding 
under which loans are raised and paid back with interest. P2P 
lending platform is an online platform on which lenders and 
borrowers register themselves to raise unsecured loans. 
Under this,  borrower can either be an individual or a legal 
entity.
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RISK MINIMIZATION AND RETURN MAXIMIZATION
In P2P Lending, borrowers are being provided with the low rate 
of interest than those offered by the other money lenders in an 
unorganized sector. Under this, lenders earn higher returns than 
what traditional investment opportunities offer. Interest rates 
charged on the loans vary from one platform to other ranging 
from a flat interest rate fixed by the platform to dynamic 
interest rates as agreed upon by the borrowers and the lenders.
Ways to get benefit of returns:
1.     To get the benefit of higher returns, diversify investments.
2. To benefit from the power of compounding, regularly reinvest 
payments.
3. To minimize default, divide overall investment and lend to 
multiple borrowers within the same category
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BASIC REQUIREMENT FOR A P2P LISENCE
The P2P Lending platforms come under the purview of Reserve 
Bank of India taking the definition of NBFCs under section 45I(f)(iii) 
of the RBI Act.
The various pillars governing the regulatory framework are:
1. Permitted Activity: The P2P platforms can be registered as an 
intermediary, as their role is to bring the lender and borrower 
together without reflecting the lending and borrowing in its 
Balance Sheet. The leverage to provide any assured return shall 
be prohibited. The funds shall be directly transferred into the 
Borrower’s account from the Lender’s account to escape the 
threat of money laundering. The FEMA guidelines shall also be 
considered in the case of any cross-border transactions.
2. Prudential Requirements:A minimum capital of INR 2 crore is 
required.
3. Governance Requirements:It includes fit and proper criteria for 
promoters, directors, and CEO. The Board must also consist of a 
reasonable portion of members having a financial background. 
A physical place of business is also required to be established in 
India, with the management primarily based in the country.
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BASIC REQUIREMENT FOR A P2P LISENCE CONTD
4. Customer Interface:Since the platform uses 
the data of the customers to assess their 
credibility, it is the duty of the portal to 
safeguard their information in the first place. 
Their operations shall be transparent, the data 
confidentiality shall be maintained. There shall 
be no false promises regarding extraordinary 
returns.
5. Reporting Requirements:These online 
entities are required to submit regular reports 
based on their financial position, loans 
arranged in each quarter, complaints received 
in each quarter etc. to the Reserve Bank of 
India.
6. Loan Amount – Loan amount to one borrower 
cannot exceed more than INR 1 Million.
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PEER TO PEER IN INDIA
The online market for loans and investments is growing at a rapid speed, so it is 
important to make a way for a wide cadre of investors and fund seekers to meet 
at a common platform for the satisfaction of their financial motives. Although 
Peer to Peer Lending (P2P) is in its infant stage in India and the risk associated 
with the P2P lending in the financial market is too prominent to be ignored.
There is a one factor which has enhanced the rise of Peer to Peer lending 
industry in India, i.e, during 2016-2017 slowdown in lending by the banks. This 
slowdown forced to seek other methods of lending in industry. As per the 
sources it has been predicted that by the year 2023, this industry will grow into 
a $ 5 billion. Presently there are more than 30 players in market like Faircent, 
Lentbox, Capital Float, Indifi, IndiaMoneyMart, Monexo, Rupaiya Exchange, 
Capzest LoanBaba, i2iFunding etc.
To regulate P2P lending platforms, RBI releases guidelines so that they can grow 
in a structured, fair and regulated manner. Last year RBI also notified that Peer 
to Peer lending platforms would be treated as Non Banking Financial Companies 
(NBFC). RBI issues guidelines time to time in order to safeguard the interest of 
all lending platforms and lenders as well as borrowers. It has been also 
predicted by the experts that soon P2P lending portals will be able to access 
credit data.
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THANK YOU
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