RBI sets Rs50-lakh peer-to-peer lending cap across NBFC platforms

Reserve Bank of India (RBI) has set a Rs50-lakh cap on the aggregate exposure of a lender to all borrowers across all non-banking financial company – peer-to-peer (NBFC-P2P) lending platforms at any point of time.

RBI’s direction comes after a review of its master directions on peer-to-peer lending by non-banking financial companies, issued on 4 October2017.
On a review, it has been decided that the aggregate exposure of a lender to all borrowers at any point of time, across all P2P platforms, shall be subject to a cap of Rs50,00,000 provided that such investments of the lenders on P2P platforms are consistent with their net-worth.
The lender investing more than Rs10,00,000 across P2P platforms shall produce a certificate to P2P platforms from a practicing chartered accountant certifying minimum net-worth of Rs50,00,000. Further, all the lenders should submit declaration to P2P platforms that they have understood all the risks associated with lending transactions and that P2P platform does not assure return of principal/payment of interest.
Escrow accounts to be operated by bank promoted trustee for transfer of funds need not be mandatorily maintained with the bank which has promoted the trustee.
RBI said its master directions regarding non-banking financial company – peer-to-peer lending platform have accordingly been updated.
IFSC Banking Units – permissible activities
RBI also issued directions relating to the setting up of IFSC banking units (IBUs). RBI said this has been done after receiving a few suggestions and queries from the stakeholders regarding operations of the IBUs and financial institutions in IFSCs. These issues have been examined and were dealt with in the RBI’s bi-monthly monetary policy statement of 5 December 2019. 
Accordingly, RBI said the directions stand further modified as follows:
  • RBI will not prescribe any limit for raising short-term liabilities from banks. However, the IBUs must maintain LCR as applicable to Indian banks on a stand-alone basis and strictly follow the liquidity risk management guidelines issued by RBI to banks. Further, NSFR will also be applicable to IBUs as and when it is applied to Indian banks;
  • IBUs are not allowed to open savings accounts. They can open foreign currency current accounts of units operating in IFSC and of non-resident institutional investors to facilitate their investment transactions. They can also open foreign currency current accounts (including escrow accounts) of their corporate borrowers subject to the provisions of FEMA 1999 and regulations issued thereunder, wherever applicable in addition to these provisions. However, IBUs cannot raise liabilities from retail customers, including high net worth individuals (HNIs). Also, no cheque facility will be available for holders of current accounts in the IBUs. All transactions through these accounts must be undertaken via bank transfers;
  • IBUs can accept fixed deposits in foreign currency of tenor less than one year from non-bank entities and can also repay fixed deposits prematurely without any time restrictions;
  • IBUs will be required to scrupulously follow "Know Your Customer (KYC)", Combating of Financing of Terrorism (CFT) and other anti-money laundering instructions issued by RBI from time to time, including the reporting thereof, as prescribed by the Reserve Bank /other agencies in India. IBUs are prohibited from undertaking cash transactions.
RBI said all other terms and conditions contained in the circular remain unchanged, adding that an updated version of the RBI circular on IBU of 1 April 2015 incorporating the amendments made hitherto is available on RBI’s website.