With over a billion mobile connections and biometrics, Chinese peer-to-peer (P2P) lending platforms are looking to India's fintech industry for future growth.
Chinese P2P platforms such as WeShare, 9F Group and CashBUS are exploring investment opportunities in the online lending segment in India and are awaiting the Reserve Bank of India (RBI) to ease the norms for governing the lending platforms, The Economic Times had reported.
“Chinese P2P lending platforms would most probably do strategic partnerships with existing licensed P2P platforms in India. Considering the Chinese P2P lending market is mature and worth more than $500 billion, India’s P2P lending industry is just beginning to bloom,” Raghavendra Pratap Singh of i2ifunding.com said.
“Chinese players have gone through the cycle of growth and have the know-how of scaling this industry,” he added.
Singh also pointed out that there should not be any regulatory hindrances for the Chinese players to enter, as the latest foreign direct investment (FDI) rules permit foreign investment up to 100 percent under the automatic route in ‘Other Financial Services’.
Overall loans disbursed till date stands at Rs 250 crore and currently, these platforms are disbursing Rs 40 crore per month and this number is expected to grow by five times by the end of the current financial year.
The Roadblock Ahead
The roadblock ahead, is, however, the restrictions imposed by the central bank to monitor the P2P lending platforms. The RBI has issued an NBFC-P2P license to at least 11 firms in India, allowing them with a loan book size of Rs 200 crore.
In 2018, the central bank had issued guidelines restricting single lenders from lending more than Rs 10 lakh across P2P platforms at a time and borrowings by a single entity to 10 lakh.
“The restrictions on P2P lending were imposed by RBI to keep the growth in check and to make sure that the industry is growing in the right direction. It has made sure that only serious players are there in the market and the lending is done to right parties,” Ajit Kumar, founder and CEO – RupeeCircle said.
The RBI restriction, however, is driving away high net-worth individual investors (HNI) and institutional investors due to the lending cap of Rs 10 lakh. Medium, small and micro enterprises and borrowers who need credit of more than Rs 10 lakhs are not approaching the P2P platforms due to the same restriction, Singh of i2ifunding.com said.
However, the RBI has been discussing with the investors in the P2P lending space who have asked to raise the investment cap from Rs 10 lakh bar as it is insufficient to run operations.
He added, “RBI restrictions are also creating negative perceptions about this industry in front of venture capitalists and private equity firms. They are evaluating different models in the fintech space (including P2P) that can become a unicorn but the RBI limit of Rs 10 lakhs has created doubt in their mind,” adding that competing with fintech companies by P2P platforms would require heavy investment on part of technology.
An easing of norms by the RBI will be welcomed by the industry as well as foreign players, as it will create a level playing field, with investors being able to offer borrowers with better rates and terms.
As per an industry insider cited by ET, “The RBI is working on it. They have held multiple consultations with various stakeholders and may be coming out with different limits for different classes of lenders.”
First Published: IST