P2P regulations: A missed opportunity4 min read 29 Oct 2017, 11:12 PM IST
RBI norms on peer-to-peer lending (P2P) impose high costs of entry, delegate discretionary power and are unclear on vital issues
The Reserve Bank of India (RBI) issued the much anticipated regulatory framework for peer-to-peer (P2P) lending earlier this month. This model emerged in 2005 as technology fused with lending and has been replicated across jurisdictions since. In its simplest avatar, it involves a platform that leverages technology to match lenders and borrowers, receiving fees in lieu of transactions successfully closed. Unlike banks that act as intermediaries and engage in liquidity transformation between (retail) lenders and borrowers, these platforms are genuine two-sided markets (similar to say, Uber) bringing lenders and borrowers together without taking any credit risk on their own balance sheet.
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