Part 2: NBFC-P2P Regulations & the August 2024 RBI Crackdown

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The Regulatory Foundation

P2P lending platforms in India are classified as Non-Banking Financial Companies — Peer to Peer Lending Platform (NBFC-P2P) and are regulated by the RBI under the Master Directions — Non-Banking Financial Company — Peer to Peer Lending Platform (Reserve Bank) Directions, 2017.

Key Requirements to Operate

1. Certificate of Registration (CoR) from the RBI as an NBFC-P2P.
2. Minimum Net Owned Fund of ₹2 crore.
3. Escrow Account managed by a scheduled commercial bank for all fund flows.
4. Fair Practices Code approved by the board.
5. Compliance with all RBI reporting and audit requirements.

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The Caps and Limits (Current as of 2026)

Parameter	RBI-Mandated Limit
Max aggregate lender exposure (across all P2P platforms)	₹50,00,000
Max exposure to a single borrower (per lender)	₹50,000
Max loan tenure	36 months
Max aggregate borrower exposure (across all P2P platforms)	₹10,00,000

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The August 2024 Crackdown: What Changed

On August 16, 2024, the RBI issued a revised circular that fundamentally reshaped the P2P industry. The key changes were:

1. Ban on Guaranteed Returns

Before: Many platforms advertised “12% guaranteed returns” or “assured monthly income.” Some even offered “liquidity buckets” that mimicked FDs. After: Platforms are explicitly prohibited from promoting tenure-linked assured minimum returns. Any guarantee of returns is illegal.

2. Ban on Liquidity Features

Before: Some platforms offered “instant exit” or “early withdrawal” features, allowing lenders to liquidate their positions before the loan matured. After: All liquidity-providing features are banned. Your capital is locked until the underlying loan is repaid. There is no secondary market.

3. Ban on Credit Enhancements

Before: Some platforms absorbed defaults using internal “safety funds” or “provision pools,” creating the illusion that the investment was safe. After: Platforms are forbidden from providing any credit enhancement, safety net, or first-loss guarantee. All default risk is borne 100% by the lender.

4. T+1 Settlement Mandate

Before: Platforms could hold idle lender funds in escrow accounts for extended periods. After: All fund transfers must be settled within one working day (T+1). Idle funds must be returned to the lender’s bank account immediately.

5. Enhanced Disclosure Requirements

Platforms must now provide explicit, prominent risk warnings including the possibility of total loss of principal.

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Impact on the Industry

The August 2024 rules effectively:

1. Killed the “FD alternative” marketing that attracted most retail investors.
2. Forced several platforms to overhaul their product offerings.
3. Reduced new investor inflows significantly as the “guaranteed returns” narrative collapsed.
4. Made P2P lending more transparent but also revealed how risky it truly is.
5. Benefited sophisticated investors who understood the risks and can now access cleaner, more transparent data.

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How to Verify If a Platform Is RBI-Registered

1. Visit the official RBI website: rbi.org.in
2. Search for “List of NBFC-P2P” in the Regulated Entities section.
3. Cross-reference the platform’s name and CoR number.
4. If a platform is NOT on this list, do NOT invest. It is operating illegally.

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Next: Part 3: Platform Reviews — LenDenClub, Lendbox, Faircent, LiquiLoans