The peer-to-peer lending industry has slumped to a major slowdown with most of the large players in this space staring at an uncertain future, after the Reserve Bank of India came down heavily on the sector last year for not properly abiding by regulatory guidelines.
The P2P sector’s assets under management (AUM) have shrunk to less than Rs 3,000 crore from around Rs 10,000 crore a year back, according to two founders of P2P lending startups, who spoke on the condition of anonymity.
“There are hardly any new loans that are being done by the platforms; most of the large platforms have stopped onboarding so business is staring at a major uncertainty,” said one of the founders.
The slowdown happened after the central bank introduced stringent rules on the P2P lending platforms, which resulted in high-growth companies like LenDen Club, Liquiloans, Faircent and Lendbox finding themselves on the wrong side of regulations.
In June, the RBI came out with guidelines on the P2P space asking platforms to abstain from guaranteeing any fixed returns or credit enhancement facilities among several other rules. In August the RBI fined Liquiloans and Lenden Club Rs 1.9 crore each for violations in following regulations.
Also Read: P2P startups look to overhaul biz, processes amidst RBI crackdown
Most of the large consumer-facing fintech partners for these P2P platforms have started winding down this business. P2P startups like Liquiloans, Lendbox and LenDen Club were working with platforms such as Cred, BharatPe and MobiKwik to acquire borrowers and lenders for these loans. While BharatPe has stopped the business, Cred has put all new investments on hold.
In December, the banking regulator’s response to a Right to Information filing made by wealth management platform Capitalmind showed the bad loans in the P2P sector at Rs 1,163 crore. The RBI had then said it did not have any data on the total AUM of the sector. However, industry estimates suggested that it was around Rs 6,500 crore at that time.
“The industry is trying to impress upon the RBI the need for secondary market transactions, but as of now we have not heard anything from the regulator,” said the second founder.
Through secondary market transactions, P2P platforms were offering instant liquidity as an option for their investors, which was one of the major attractions for people investing through these platforms.
The person added that the industry has been requesting the regulator to at least allow investors from the period before August 2024 to take their money out through secondary transactions, so that investor interest is protected. The RBI’s additional guidelines and clarifications on existing guidelines came in August 2024.
“Many of the major players are not in a position to implement the regulatory guidelines mandating T+1 settlements, it is disturbing the flow of the business completely,” said the first founder cited earlier.
Mumbai-based LenDen Club is issuing short-duration loans of around six months through the platform. According to disclosures issued by the firm, its AUM as of end February stood at Rs 983 crore. It disbursed Rs 1,251 crore of loans in the December quarter of the current financial year. The startup had disbursed Rs 2,334 crore in the December quarter of financial year 2023 and Rs 255 crore in the December quarter of financial year 2024.
Lendbox cofounders are now focusing on a larger wealth management play through a different platform named Per Annum.
The P2P sector’s assets under management (AUM) have shrunk to less than Rs 3,000 crore from around Rs 10,000 crore a year back, according to two founders of P2P lending startups, who spoke on the condition of anonymity.
“There are hardly any new loans that are being done by the platforms; most of the large platforms have stopped onboarding so business is staring at a major uncertainty,” said one of the founders.
The slowdown happened after the central bank introduced stringent rules on the P2P lending platforms, which resulted in high-growth companies like LenDen Club, Liquiloans, Faircent and Lendbox finding themselves on the wrong side of regulations.
In June, the RBI came out with guidelines on the P2P space asking platforms to abstain from guaranteeing any fixed returns or credit enhancement facilities among several other rules. In August the RBI fined Liquiloans and Lenden Club Rs 1.9 crore each for violations in following regulations.
Also Read: P2P startups look to overhaul biz, processes amidst RBI crackdown
Most of the large consumer-facing fintech partners for these P2P platforms have started winding down this business. P2P startups like Liquiloans, Lendbox and LenDen Club were working with platforms such as Cred, BharatPe and MobiKwik to acquire borrowers and lenders for these loans. While BharatPe has stopped the business, Cred has put all new investments on hold.
In December, the banking regulator’s response to a Right to Information filing made by wealth management platform Capitalmind showed the bad loans in the P2P sector at Rs 1,163 crore. The RBI had then said it did not have any data on the total AUM of the sector. However, industry estimates suggested that it was around Rs 6,500 crore at that time.
“The industry is trying to impress upon the RBI the need for secondary market transactions, but as of now we have not heard anything from the regulator,” said the second founder.
Through secondary market transactions, P2P platforms were offering instant liquidity as an option for their investors, which was one of the major attractions for people investing through these platforms.
The person added that the industry has been requesting the regulator to at least allow investors from the period before August 2024 to take their money out through secondary transactions, so that investor interest is protected. The RBI’s additional guidelines and clarifications on existing guidelines came in August 2024.
“Many of the major players are not in a position to implement the regulatory guidelines mandating T+1 settlements, it is disturbing the flow of the business completely,” said the first founder cited earlier.
Mumbai-based LenDen Club is issuing short-duration loans of around six months through the platform. According to disclosures issued by the firm, its AUM as of end February stood at Rs 983 crore. It disbursed Rs 1,251 crore of loans in the December quarter of the current financial year. The startup had disbursed Rs 2,334 crore in the December quarter of financial year 2023 and Rs 255 crore in the December quarter of financial year 2024.
Lendbox cofounders are now focusing on a larger wealth management play through a different platform named Per Annum.
