A Group of P2P Lending Platforms Decides to Stop Offering Instant Withdrawal Products
In a move towards self-regulation, a group of peer-to-peer (P2P) lending platforms in India has made the decision to discontinue offering instant withdrawal products to customers after March 31. This decision was made by the Association of P2P Lending Platforms and includes platforms such as Liquiloans, Lendbox, and Faircent. Liquiloans, which is backed by Matrix Partners, has already informed its business partners that it will pause the liquid scheme option for new lenders. Other P2P startups providing this service will also halt the scheme.
Background: RBI’s Displeasure with Instant Withdrawal Products
The reason behind this industry-level decision is the displeasure expressed by the Reserve Bank of India (RBI), the country’s banking regulator, regarding these products. The RBI considers them to be a breach of licensing conditions. In February, Deputy Governor M Rajeshwar Rao publicly criticized such products at an event. The central bank is particularly concerned about P2P schemes that resemble fixed deposits offered by banks, where users can earn interest and withdraw funds instantly before maturity.
Impact on P2P Lenders and Consumer-Facing Applications
The decision to stop instant withdrawal schemes will affect various P2P lenders in India, including Liquiloans, Lendbox, and Faircent. Additionally, consumer-facing applications such as Cred and BharatPe, which offer P2P investment opportunities in partnership with these platforms, will also have to discontinue their instant withdrawal offerings. However, they can continue to offer fixed tenure lock-in products.
Redesigning Products and Regulatory Compliance
The RBI’s directives may lead to the redesigning of the products currently sold by these consumer-facing apps. P2P lending startups are being cautious about deep integrations with larger applications due to regulatory concerns. Liquiloans, for instance, has already undergone an audit by the RBI and implemented suggested changes. The central bank’s emphasis on transparency and adherence to licensing conditions is pushing P2P platforms to operate solely as intermediaries connecting lenders and borrowers.
Hot Take: P2P Lending Platforms Respond to RBI’s Concerns
The decision by a group of P2P lending platforms in India to discontinue instant withdrawal products reflects their commitment to self-regulation in response to concerns raised by the RBI. While these products offered attractive interest rates and convenience, they were deemed risky and non-compliant with licensing conditions. By halting such schemes, P2P lenders aim to align themselves with the RBI’s expectations and promote transparency in the industry.
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