In this expensive world, it’s tough for common people to live without the loans. When we talk about loans, then basically we think about banks. But now the concept of bank loans is changing and there are other options also available in market for borrowing loans and in that Peer to Peer is one. Peer to Peer lending provides various flexibilities to the borrower and lender both. You can easily borrow loans from friends, relatives or any other borrowers with just few documents.
P2P Lending implies Peer to Peer lending i.e. when people loan to different people. In a sorted out structure, this has existed likely since the presentation of idea of cash itself. In any case, what P2P lending alludes to, is a sorted out, innovation-driven marketplace, where borrowers and lenders meet up to participate.
2.P2P Segment in India
Till now P2P lending is simply expanding its roots in India. Numerous players have entered the business sector like Faircent, IndiaLends and so forth. While these organizations are step by step spreading the idea of Peer lending in the buyers. The Regulatory environment is still indistinct about how to handle P2P lending. The Indian government proactively recognizes the requirement for group subsidizing. To consider crowd financing to happen in a stable regulatory environment, SEBI issued a whitepaper in 2015 which discussed wide rules for P2P lending in India. Starting late Dec 2015, RBI was taking a shot at turning out with a discussion paper on peer lending and welcoming an energetic trade of viewpoints on this.
In India, innovation empowered P2P loaning is at an incipient stage, with organizations entering this enclosure just in the most recent couple of years. The selection and adoption, be that as it may, have been tremendous from the general population. A rough evaluation would peg the innovation empowered P2P lending market in India at about more than $4 million. In the most recent eight months, Faircent has had more than 1500 lenders submitting about $2 million and approximately 6500 borrowers looking for over $3 million.
3.P2P lending Working Technology
It works by a company bringing lenders and borrowers so that the borrowers can get cash from the moneylenders. The borrower gets a credit at an extraordinary rate and acquires a great enthusiasm on the cash they obtained. The accommodating thing here is that the banks are prohibited from the procedure.
Moneylenders place offers on the advances that are recorded which fit their speculation criteria in the wake of filtering through hundreds demands. Online profiles of the borrowers’ can give their budgetary qualities and obligations, including their month to month salary and costs.
4.Major P2P Players in India
I wouldn’t call any of them fruitful yet, the idea is in early stages in India, they have far to go before getting to be effective. In any case, yes, some of them are showing improvement over the others. As far as the number of users going live on their stage and getting financed, they can be ordered as Faircent, Lendbox, Vote4cash, Loanmeet, i-loan, Rupaiyaexchange, i2iLending, lendenclub, and so on.
Yet, I accept that challenges are too high and present situation doesn’t generally make a difference much, the genuine rivalry will begin once the friction is expelled from the system.
5.Challenges of P2P in India
Following are the 3 challenges faced by the online peer to peer lending platforms in India:
- No Digital Signatures – Hence more payment time
- No Regulations – Hence issue of taking care of instalments.
- No entrance to Credit Bureaus – Because of which the borrowers’ defaults are not reported at anyplace and they may feel they can escape with defaults. Subsequently, the stages need to take Post Dated Check from them, which is not a decent practice.
6.Advantages and Disadvantages of P2P in India
- Higher returns (no less than 3 times more) on unmoving cash compared with Saving Account: The return on a bank account in India is 4% while P2P lending typically offers a base profits of 12% for advances given to borrowers.
- Monthly profits are invested through borrower EMI installment: While other venture alternatives have a lock-in period, p2p advances will give financial specialists month to month returns i.e. liquid cash.
- Another investment alternative: where financial specialists can choose whom they wish to put resources into, their desired loan fee and spread their danger by putting resources into various borrowers – Min. speculation sum is Rs.5,000.
- Lower loan fees beginning at 12%. Bank rates are anyplace between 17-19% and offered to few.
- No prepayment charges – Banks charge anyplace between 2-4% of the chief extraordinary as pre-installment charges.
- Flexible advance sums – Rs.25,000 – Rs.300,000: Banks commonly offer advances from Rs.100,00 as it were.
7.Future of P2P Lending
There are several factors determining the growth of P2P:
- Rise in Interest rate: Most specialists’ trust that as financing costs expand, increase the quantity of loan defaults. However, the length of the economy is doing great and unemployment is low, the quantity of defaults should not rise that much.
- Regulation: As of now there is not the major regulatory environment for P2P but due to the rapid growth of P2P in recent times RBI is making strong moves to create a proper P2P system.
- Competition from banks: If P2P succeeds in future, then Banks have to regulate their interest rate because the loan facility from bank will be reduced. This will create a competitive environment and will certainly helpful for the customers.
- Market Size: P2P is highly essential for the growth in the economy of India because it increases the liquidity of cash available. There are many companies these days, providing P2P service because of its high customer acceptance.