Finance

Union Budget 2019: P2P players pitch for tax exemption, scrapping of lending cap

Updated : June 27, 2019 08:11 AM IST

The govt is urged to remove the limit imposed on maximum lending and borrowing amount.

P2P platforms could promote credit flow to the micro, small and medium enterprises.

Investors are also expecting the government to take initiatives to develop the fintech space.

The Narendra Modi-led National Democratic Alliance government will present the Union Budget on July 5. All eyes are on Finance Minister Nirmala Sitharaman, who will be presenting her first budget, and many sectors including the peer-to-peer (P2P) lending platforms, are looking forward to grabbing their share.

While the Reserve Bank of India (RBI released the guidelines for the lending space back in October 2017 when there were only a handful of players in the market, lenders in the space expect the 2019 Union Budget to provide the sector with new incentives and provisions to make them popular, even to individuals with poor credit history.

Still in its nascent stage, P2P lending is a newcomer in the Indian lending space, making it easier for borrowers to avail a loan with a flexible interest rate and without any worry of rejection from banks due to poor credit history.

Here's what P2P lenders expect from the Budget

The RBI has issued an NBFC–P2P licence to 11 lending platforms in the sector with a loan book size of Rs 200 crore and 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 Rs 10 lakh.

The RBI restriction, however, is driving away high net-worth individuals (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 lakh are not approaching the P2P platforms due to the same restriction.

"Removing the limits imposed on maximum lending and borrowing amount, the government should make the interest earned on P2P lending tax-free, making the lending space a very lucrative investment option for retail customers and boost the sector to unprecedented growth," Co-founder of i2iFunding Raghavendra Pratap Singh said.

P2P platforms could be a suitable option and solve the problem of credit flow to the micro, small and medium enterprises (MSMEs) which generate maximum employment and are the backbone of the economy, Singh added.

“P2P investment can be given a separate exemption from taxes as it is helping to get the underserved masses to the mainstream of financial inclusion. Also, the income from P2P lending is taxed, but the losses incurred by the lender is not set off against the profits. This shall be looked into,” Abhishek Gandhi, co-founder and CFO, RupeeCircle, noted.

Apart from the P2P lending sector, investors are also expecting the government to take initiatives to develop the fintech space. “The fintech sector is finding it tough to reach out to and instill confidence in the Indian masses which are known to be conservative in adapting to changing financial trends in the country,” Gandhi said.

"Measures to create awareness and help the Fintech segment reach out to the masses are expected from the budget. Also promotion of technology to ease out processes of customer on-boarding through Aadhar stack would be a major boost for fintech players," he added.

Union Budget 2019: P2P players pitch for tax exemption, scrapping of lending cap

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