Context:
The peer-to-peer (P2P) lending industry in India is facing a significant slowdown after the Reserve Bank of India (RBI) imposed stringent regulatory actions in 2024.
- The sector’s assets under management (AUM) have dropped sharply from around ₹10,000 crore to less than ₹3,000 crore in the past year.
- Large platforms such as LenDen Club, Liquiloans, Faircent, and Lendbox are struggling to continue operations, with most halting new loan disbursements.
Key Regulatory Actions
- In June 2024, the RBI introduced tighter guidelines prohibiting
- Fixed return guarantees
- Credit enhancement facilities
- Non-compliance led to penalties, In August 2024, RBI fined Liquiloans and LenDen Club ₹1.9 crore each.
- The guidelines also introduced strict mandates such as T+1 settlements, which many platforms are struggling to implement, disrupting liquidity and operations.
Impact on Business Models and Fintech Partnerships
- Major consumer-facing fintech partners have begun winding down P2P collaborations:
- BharatPe has exited the business
- Cred has paused new investments
- MobiKwik has scaled back borrower and lender onboarding
- P2P platforms previously relied on these fintechs for acquiring both borrowers and investors, fueling rapid growth until regulatory intervention.
Rising Bad Loans and Investor Concerns
- According to RBI’s response to a December 2024 RTI filed by Capitalmind:
- Bad loans in the P2P sector stand at ₹1,163 crore.
- While RBI had no official AUM data, industry estimates pegged it around ₹6,500 crore at that time.
- The sector is facing challenges in providing liquidity via secondary market transactions, which were previously a major attraction for investors.
- The industry has requested RBI to allow secondary exits for investments made before August 2024 to protect investor interests.
The Indian P2P lending sector is grappling with regulatory overhang, shrinking AUM, and rising bad loans. Key platforms are facing existential threats as the RBI’s stricter compliance framework disrupts business models and fintech partnerships. The industry’s recovery will depend on future regulatory clarity, particularly around secondary market transactions and investor protection measures.
