Why Peer To Peer lending is on the rise in India?


It is estimated that peer-to-peer lending is all set to grow in India to a US $5 billion industry by 2023, and will continue to fill up the void which is left by the banks.


There was an Economic Survey (2017-2018) tabled in the Parliament in January which has shown that the small and medium-sized enterprises will continue to be seriously underserved by the traditional financial sector.

The loans disbursed by the banks will have amounted to Rs. 26,041 billion where only 17.4% will be going towards the SMEs. Since the banks are tightening themselves up, P2P lending platforms have been witnessing steady traction since they serve a huge section of borrowers who otherwise fail to qualify for a loan because of no or poor credit scores.

In context of borrowers, the SMEs are hugely using these online platforms for a loan. In the context of lenders, the investors are also said to receive higher returns.

Finzy, a P2P lending platform, has closed the US $ 2.3 million pre-series A funding round. The start-up will use these funds for technological advancements, expansion and stronger distribution networks. The consumer lending platform has claimed that the monthly loan disbursement has grown by more than 2X in the last six months, where it further expects to grow by 3X by March 2019.

The Reserve Bank of India has made a set of rules for the sector and came out with precise regulations in October 2017. The main requirements among them are that the P2P lenders should register with the RBI.

Although RBI has not released the number of applications, the industry executives believe that there are close to 40 businesses which have approached the regulator for a license. But due to RBI’s stringent conditions, this will cause the smaller players to depart from the business, which leaves room for larger platforms and players to get into P2P lending, since it is a regulated space.

An impressive thing to be noted here is that there were deals in 2016 which included a wide range of startups like p2p loan comparison platforms, consumer loan providers, and commercial loan providers. This implies that the growth is across the sector and not only concentrated with a few ideas. There is also another aspect of a P2P loan i.e. the borrowings made to start a business. Since the government of India had its key focus around Make in India and Startup India, this has given a big boost to people’s entrepreneurial ambitions, which have been spurred.

It is easier to get a business loan from the P2p lending platform where one can see large demand stemming from this type of segment. Thus, a heartening fact to note is that P2P in the country has made the right start and also the right amount of noise.

Thus, Peer to Peer lending platforms are evolving into a highly viable and profitable alternative asset class which is said to be competing with equity and mutual funds.


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