New Delhi, July 5 (KNN) Peer-to-Peer (P2P or Marketplace) lending which is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers has globally emerged as a viable alternative to traditional banking channels. But as per the experts such a platform might not replace the traditional banking institutions at the pace it was done in countries like USA, UK, China, Australia and Brazil.

The merits of P2P lending and its attempts to reduce the delivery time and operational costs of lending, particularly for small-ticket loan along with the main advantage for borrowers to have a chance of getting better rates than the traditional banks can offer and for lenders to get a higher return than the one earned from the savings account go hand in hand with the higher risks associated with the platform that is unregulated.

Talking to KNN on these lines Rajesh Dubey, Partner at SMEBOTS LLP, said, “Since most P2P platforms are in nascent stages currently in India, such a move cannot be an alternative to the traditional banking system."

“Though it surely is a welcome step and such an innovation can cover the loop holes in the traditional system but it cannot altogether replace the same. There are chances of due diligence not been carried out as effectively as expected by the beneficiaries of the P2P lending due to apprehensive risk management system put in place which might ultimately lead to loss of enthusiasm in the platform as a whole,” said the entrepreneur.

“Thus, both P2P lending and the banking systems having their own virtues will grow together in coming years but one will not and cannot easily replace the other,” the expert opined.

"Further, the ecosystem of providing open access to CIBIL or Bureau information to the P2P platforms and better contract enforcement (akin to DRT / SARFAESI) may go a long way in a healthy growth of P2P platforms and their filling the finance void faced by most of the MSMEs," Dubey added.

Talking to KNN about its scope in India Manika Prem Singh , Founder Orbiseconomincs said, ‘’Though lending platforms have always been there, P2P lending is a new platform exploring easy and viable options for lending to SMEs”.

“Also, as India is opening its gates to entrepreneurship and becoming more of a market economy there is a necessity for more and more liquid funds to be available for entrepreneurs and SMEs wherein P2P lending comes as a welcome step. But it should be cautiously executed in a way which neither hurts the borrower nor the lender,” the expert opined.

“Since, it is and online lending platform there needs to be extremely clear and appropriate mechanisms put in place to sideline all the fraud entities that might come in way ahead on such digital platforms”.

The infrastructure to enable this model is already being put in place by the authorities via platforms like Digital India, Aadhar, UPI etc. (KNN/ GK)