What is peer-to-peer lending

1. Peer-to-peer lending is a form of crowd-funding used to raise loans for people who need to borrow, from people who want to invest.

2. It enables individuals to borrow and lend money without any financial institution as an intermediary, and extends credit to borrowers who are unable to get it through traditional financial institutions.

3. The main idea is savers getting higher interest by lending out their money instead of saving it, and borrowers getting funds at comparatively low interest rates.

4. It typically uses an online platform where the borrowers and lenders register themselves. Due diligence is carried out before allowing the parties to participate in any lending or borrowing activity.

5. All P2P platforms will now be considered non-banking financial companies and regulated by the RBI.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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