P2P lending or peer-to-peer lending is a mode of direct debt financing that enables individuals to borrow and lend money on mutual terms. Platforms like IndiaMoneyMart (IMM) eliminate the traditional financial institutions and enable businesses to flourish through a people to people contact.
P2P companies leverage artificial intelligence to match curated borrowers to lenders with appropriate risk appetite. Necessary due diligence is undertaken to verify the credibility and identity of the borrowers before they are listed for funding. While every P2P platform would have variations in conducting due diligence, the objective remains the same for all players in this ecosystem. The prime idea being - borrowers who are eligible and credible should be able to receive a loan at an affordable rate and a lender should be able to create passive income - sitting at the comfort of their home.
The P2P concept is a financial disruption to favour the masses and help them create wealth using the power of compounding.
Beyond human needs, technology has emerged as a mainstay and new normal in daily lives camouflaged as Internet connectivity. With increasing reach and lowering the cost of access to the Internet, the question emerges is how soon P2P players can ramp up technology to serve customers across all pin codes.
Since the entire credit assessment and financial behaviour of borrowers is assessed and depending on the risk appetite, lenders take an informed lending decision on P2P platforms. Wilful defaulters are reported to credit rating agencies such as CIBIL, CRIF, Experian and Equifax to further add security for lenders.
RBI has put a restriction allowing a maximum of INR 10 lakhs investment by an investor/lender across all platforms and one lender can give a maximum of INR 50,000 to a borrower across all P2P platforms. On the other hand, the platform is open for smallest of lenders and borrowers. Users can begin investment starting INR 5,000 and in his/her portfolio distribute the allocated funds amongst multiple borrowers to allow for diversification of risk. So, the platforms are open for smallest of lenders and smallest of borrowers - through some P2P platforms are keeping limits on minimum borrowing and lending.
To sum it up - the peer-to-peer concept is for the masses and not restricted to select few.
(With inputs from agencies.)