With the Reserve Bank of India (RBI) expected to come out with final guidelines on peer-to-peer (P2P) lending soon, the market for online lending and borrowing for thrift credit is gradually expanding.

The industry is expecting RBI to create separate category of NBFCs (non-banking finance company) for P2P lending on the lines of NBFC MFIs (Microfinance Institutions), which in turn is expected to give a strong footing to P2P facilitators.

"Since P2P platforms do not undertake lending themselves, and are mere facilitators, capital requirement of Rs 2 crore, which is at a par with NBFCs, could be too high for most P2P platforms to meet. Hence, we suggested RBI to create a separate category of NBFCs," according to the founder of a P2P company.

While RBI prepares the blueprint to regulate the sector, for some of the pioneers in the field, business is growing at the rate of an average 30-35 per cent on a monthly basis. This apart, the sector is getting support from a number of bigwigs from the corporate sector.

Delhi-based Faircent, which started operations around 2014, saw almost more than ten times growth in loan transactions in the last one year, according to Rajat Gandhi, founder and CEO, Faircent. So far, the company has raised close to $3.5 million, with one of the investors being Mohandas Pai, former director at Infosys. On an average, there has been an almost 35-40 per cent growth in monthly business for the company, according to Gandhi. The number of loan requests in the platform too has doubled between April-September 2016, from about 14746 in April to about 29108 in the beginning of September.

Another P2P lending platform, Lendbox, which started operations about ten months back, has already facilitated loans of around Rs 9 crore in its platform. Loan disbursements through the platform has been growing at around 30-32 per cent on a monthly basis, according to Ekmeet Singh, CEO, Lendbox. Further, the company is looking to raise around $3 million from investors.

"After RBI came out with draft regulations on P2P lending, there has been an increase in interest in the sector from institutional investors as well as borrowers and lenders. We are in advanced stages of discussions for raising around $3million to fund growth," said Singh.

Micrograam, a rural-centric P2P firm is looking to raise around Rs 10 crore from investors, said Rangan Vardan, founder, Micrograam. At present, the capital base of the company is close to Rs 2.5 crore. The company has facilitated lending of about Rs 21 crore in the last five years. In 2014, the company had roped in V Balakrishnan, former Chief Financial Officer of Infosys, as its chairman.

Hyderabad-based i-Lend, which started operations around 2013, has been going slow in lending, but is expecting a surge in business and institutional lending after RBI comes out with final guidelines on P2P lending. The company is looking to raise around $1.5-2 million from investors.

"At present, we are growing at a rate of around 15-20 per cent on a monthly basis. We are present in three cities--Hyderabad, Chennai and Chandigarh. We are planning to expand to Bangalore soon. The sector is waiting for RBI guidelines. Once it comes out, institutional investments are likely to increase significantly," said Shankar Vaddadi, Founder & Director, founder and director, i-lend.

P2P lending is a form of crowd-funding used to raise loans which are paid back with interest. Interest rates on P2P platforms are linked to risk profile of the borrower.

In a typical rural-centric P2P model, a website publishes a list of loan seekers from NGOs or an MFIs. A prospective lender chooses the borrower of his or her choice, makes payments through an online platform and gets monthly or quarterly payments on the loan, with 6-8 per cent return. The MFIs or the NGOs, which are in charge of monitoring the loans, also take care of disbursements and collections at the ground level, and get about 6-7 per cent returns. The facilitating online platforms retain 2-5 per cent as their own fees. Thus, the end cost for a borrower comes anywhere between 17-20 per cent.

Click here to read the story at source

http://www.business-standard.com/article/finance/p2p-lending-on-growth-trajectory-ahead-of-rbi-guidelines-116091300589_1.html