Mumbai, Apr 28 (KNN) The Reserve Bank of India has sought for comments on the Consultation Paper on Peer to Peer Lending, a form of crowd-funding which can be defined as the use of an online platform that matches lenders with borrowers in order to provide unsecured loans.

The Reserve Bank of India for the first time proposed rules for peer-to-peer lending.

Under Peer to Peer lending, the borrower can either be an individual or a business requiring a loan. The lender can also be a natural or a legal person. Fee is paid to the platform by both the lender as well as the borrower.

There are many variants of Peer to Peer lending platforms in terms of the nature and extent of services provided by them and global regulatory practices also vary. At present, there is no clear regulatory framework in India governing the functioning of the Peer to Peer lending platforms, RBI said in a release.

The Consultation paper outlines the pros and cons of regulating the sector and proposes a suitable framework for regulating this activity, which includes minimum capital, permitted activity, governance requirements, fair practices code for customer dealing and data security.

The paper basically attempts to assess the various business models that are operational both domestically and internationally and the legal framework within which these institutions operate.

Further, international regulatory practices on crowd funding and P2P lending available in public domain were also examined to get an understanding of the regulatory approaches adopted by different jurisdictions, the Consultation Paper highlights.

It was stated during the First Bi-Monthly Monetary Policy Statement 2016-17 that a Consultation Paper will be put up on the Reserve Bank’s website for public comments and based on the feedback, the contours of regulating Peer to Peer Lending will be decided in consultation with the Securities and Exchange Board of India (SEBI). (KNN Bureau)