Will ban on unregulated deposit schemes benefit P2P lending?


The next time you are looking for an unsecured loan, make sure you reach out to the right lender. Accepting unregulated deposits will now be illegal. Government has brought an ordinance to ban unregulated deposit schemes (UDS) to protect individual investors from spurious lenders and Ponzi schemes.

The ordinance calls for strict punishment, including jail against those collecting money by way of loan or any other form with a promise to return the money with benefit. However, informal borrowing among friends has been kept out of the purview of the ban.

There are many salaried individuals and small & medium enterprises (SMEs) who borrow from small brokers and payday lenders at very high interest rates. This move aims to check such illegal deposits across India.

“A large population of employees borrow from colleagues or friends at very high interest rates. All these small players who have enjoyed such lending business without legal norms would now fear the law and eventually cease to exist,” says Dhiren Makhija, CEO, Cashkumar told ET.com..

This is in line with RBI’s guidelines on the NBFC-P2P sector, issued in October 2017 to regulate the unorganized lending business in the country.

Makhija sees a great opportunity for P2P industry to this segment of the population. “P2P being a regulated platform by RBI, it is a a great opportunity. P2P will not only aggregate this disorganised lending segment but also create a great asset class for the common man,” adds Makhija.

P2P players believe they can attract the attention of small investors to lend on NBFC-P2P platforms regulated by the RBI. This will also motivate small borrowers to do transactions only through certified financial institutions.

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“All unregulated deposits would now have regulated route that will not only help in boosting digital economy but will also help in increasing the taxable income. Needless to say, P2P lending industry is poised to be a $5 billion industry by 2023 and can play a key role in financial inclusion and building a corruption free nation,” says Rajiv M Ranjan, Founder & CMD, PaisaDukan.com.

“NBFC-P2P lending platforms can become a formal route for many of the small-ticket informal transactions that are normally ridden with high transaction costs and significant collateral needs. P2P lending can finally emerge fully as a new asset-class for individual lenders in India,” said Sanjay Darbha, Founder & CEO, PeerLend.in.

All transactions carried out on NBFC-P2P lending platforms are regulated by RBI.





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