How to lend, borrow on a P2P platform

A Peer to Peer (P2P) lending platform is an online aggregation platform of lenders and borrowers. It provides easy, flexible and quick access to funds for borrowers and higher rate of return to the lenders as compared to the bank FDs. It also provides funds to borrowers at a relatively cheaper rate than banks or financial institutions.

Who can lend?
Any individual, partnership firm, HUF society or artificial body, whether incorporated or not, with a valid bank account in India and PAN card can lend on a P2P platform.

Amount and tenure
The maximum tenure for loans made under P2P lending is three years. The lender can start with a minimum of Rs 500 and maximum of `Rs 0 lakh across P2P platforms.

Signing up
To register, a lender needs to provide bank details, PAN and KYC details and then deposit funds in the lender’s escrow account.

Due diligence
Before finalising, the lender is required to do a credit assessment and risk profiling of the borrower. The P2P platform provides credit reports and credit history related data to the lender to decide better.

Disbursal and repayments
The platform maintains two escrow accounts, one for funds from lenders, and the other for collections from borrowers. No cash dealings are allowed.

Points to note

• Lenders on P2P platforms are termed as investors seeking a higher return on the investment.
• A P2P platform must be registered as an NBFC and as a P2P lender with the RBI.
• Verify the credentials of a lending platform before lending.

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