Investor Safety

RBI Safety Shield for Investors

(While no investment is completely risk-free, due to the involvement of the following factors P2P Lending has become a safer option for investment:) – edited line h

The aggregate exposure of a lender to all borrowers at any point of time, across all P2Ps, shall be subject to a cap of Rs. 50,00,000/- (Rupees Fifty Lakhs) provided that such investments of the lenders on P2P platforms are consistent with their net-worth

The aggregate loans taken by a borrower at any point of time, across all P2Ps, shall be subject to a cap of Rs 10 lakh.

The exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000.

The maturity of the loans shall not exceed 36 months.

All the fund transfer between participants is to take place through escrow accounts operated by a bank promoted trustee.

The interest rate should be in annualized percentage rate format.
 

A SAFER INVESTMENT HANDS: P2P LENDING

While no investment is completely risk-free, due to the involvement of the following factors P2P Lending has become a safer option for investment:

ROLES OF RBI

To safeguard the interests of all parties involved in lending, borrowing, and P2P lending platforms, the RBI is playing as a safety shield by governing the regulations. P2P Lending companies are liable against RBI to submit all performance-related reports. From the recent update on November 22, 2019, the Reserve Bank of India increased the exposure limit imposed on investors in peer-to-peer lending platforms to 50 lakhs from 10 lakhs previously. The sector needs enough space to expand in order to reach its full potential, so this is undoubtedly a positive attempt to support it.

ESCROW MODEL

The transfer of funds between participants in the peer-to-peer lending platform is made through an escrow mechanism operated by a trustee who is compulsorily funded by the bank holding the escrow account. All transfers must be made to or from a bank account and cash transactions are strictly prohibited.

MANAGEMENT OF RISK

The crowd-funding model is being followed by P2P lending. The P2P lending platforms distribute your investment amount among numerous borrowers as opposed to lending money online to a single borrower. By doing this, your risk is spread out in the event that some of the borrowers default.

BORROWERS IDENTITY INSPECTION

Internal credit scoring is done by peer-to-peer lenders in India to digitally verify the borrowers' financial, professional, and personal information. They take charge of the paperwork and evaluate the borrower's creditworthiness. As a result, you can avoid doing the research yourself, which might not be possible due to a lack of time or resources.

CLARITY

The P2P lending website serves as the primary means of communication for both lenders and borrowers. You will be kept updated about all the investment related information. As a result, the entire process is purely transparent and clear.
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