China’s “Peer To Peer Lending” crashes, taking many lives with it; RBI to regulate Indian platforms


The Reserve Bank Of India, in a gazette notification has identified peer-to-peer lending startups as a special category of NBFC (Non Banking Financial Companies) and it will regulate them.

So, now we expect the RBI to release the guidelines and also to award approvals/licenses to existing and new players.

Now that RBI has said that it is the sole regulatory authority of everything “p2p lending”, the ambiguity has been erased and it shall pave the way for entry of more players and also, the capital.

Peer to Peer online lending platforms connect lenders with borrowers with algorithms powered decision making ability, which can judge the credit worthiness and risk profile of the borrower. They are supposed to make a quick disbursal of loans also.

So, where the “financial inclusion” has been the buzzword for past 5 odd years, if not more, let us look at what has been the result of peer to peer lending industry, from where it has been picked up, essentially.

Yes, you guessed it right, China!

According to a Shanghai based research group, Yingcan, more than 400 peer-to-peer lending platforms have collapsed this year, only between June and August. Another 200 are expected to fall, well like, dominoes. That would still leave, 1800 of them.

P2P lending attracted 50 million people in China with the lure of interest rates of 10 percent and more and total investment outstanding has gone past $200 billion.

Many P2P lending platforms operated as Ponzi scheme, requiring cash inflows to pay out, what is called in Hindi language, “Iski topi, uskey sir”. And this despite of the fact that, companies like PPMiao, were state backed.

People have lost everything against the promise, some could not bear, and decided to end everything, along with their suffering.

Lets hope we learn from this and not fall to the greed!

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