RBI Concept Note on P2P Lending, soon

RBI Concept Note on P2P Lending, soon

In order to improve ease of doing business and make the process of registration of new non-banking finance companies smoother and hassle free, the Reserve Bank of India (RBI) is simplifying and rationalising the registration process, a top official said at an ASSOCHAM event held in Mumbai.

“The new application forms will be simpler and the number of documents required to be submitted will be reduced and the entire process could be made online for ease, speed and transparency,” said Mr R. Gandhi, deputy governor, RBI while inaugurating an ASSOCHAM summit on ‘NBFCs: The Changing Landscape.’

He also said that RBI will soon put up a concept note on peer to peer lending (P2P) on its website for public comments and the contours of regulating P2P lending will be decided in consultation with markets regulator Securities Exchange Board of India (SEBI).

Mr Gandhi said that considering the developmental needs of the economy, the RBI will continue to approve new types of NBFCs.

Highlighting that small NBFCs cannot be totally exempted from regulation, he said “They do deal with customers and customer protection issue will remain and that will need regulation, that is why we have simplified the regulatory framework for these small NBFCs.”

Talking about harmonisation of regulations for NBFC sector with commercial banking, Mr Gandhi said that RBI’s stance is to harmonise, not equalise the regulations. “Similar activities should be subject to similar regulation, this is driven primarily to remove arbitrage.”

On the issue of allowing deposit taking activity of NBFCs, he said that it is a specious argument because maturity transformation automatically runs the risk of asset liability mismatches, and a non-banks runs a much higher liquidity risk, hence it will be prudent to let only banks accept deposits.

Mr Gandhi also said that NBFCs lending for infrastructure will have greater scope in coming years, as economic growth will bring forth new projects.

He added that ‘Make in India’ and ‘Start Up’ businesses could offer fresh opportunities for the NBFCs to grow.

He concluded by saying that non-bank channels play an important role in financing the real economy but are also a source of systemic risk especially when highly interconnected with the banking system.