NBFCs tie up with P2P lending firms to source customers

RBI looking to monitor sector as it’s gaining momentum with several online players setting shops

NBFCs tie up with P2P lending firms

Mumbai: Non Banking Financial Companies (NBFCs) have now begun to tie up with players in the peer-to-peer lending space in order to scout for potential customers.

This comes at a time when the Reserve Bank of India has been flagged concerns over the P2P lending space as it continues to be an informal channel.

At present, it does not come under the ambit of the banking regulator and they are looking at regulating this space.

However, considering that this sector has been gaining momentum in the last couple of years and several online players have sprung up, RBI is now looking at monitoring this sector.

Players explain that at the moment the smaller NBFCplayers have been tying up with these online players to cut down on their cost.

“If you are a small NBFC then the cost of loan origination can be prohibitive. Typically, if you process ten loan applications then you end up giving loan only to one customer and as a result the cost of credit verification is very high. However, on our platform they are getting verified data and so it brings down their cost,” said Shankar Vaddadi, Founder, i-lend.in, a P2P lending platform.

Another player in the P2P lending space adds that at a time when the overall credit in the banking system has been subdued such tie-ups allow these NBFCs to tap into the customer base that may not be a part of the formal banking channel.

These online portals works in the space of peer-to-peer lending (P2PL) arrangements, which allows an individual to lend money to other unrelated individuals without assistance from any financial intermediary.

“We have various customers who are coming online looking to get a loan and these also include the small and medium enterprises apart from individuals. Considering that we place so many checks the risk profiling of these customers becomes easy and therefore it is more convenient for even the NBFCs to tap into this base and offer loans,” said a head of another P2P lending platform.

Players have also added that some private banks have also expressed interest in the P2P lending space. However, no tie-ups have happened.

One mid-sized NBFC player that hasn’t yet tie up with any players in the P2P lending space but is exploring an arrangement said that it makes sense as it turns out to be a win-win for both customers as well as the company. “Since out cost comes down and after the checks and processes placed by this online platform their risk profiling becomes better so we can also pass on the benefit to the customer by offering them a better rate of interest.”

The interest rate charged to a borrower on these online platforms can range anywhere between 0-36 per cent and the maximum amount that they typically allow to be borrowed is Rs 5 lakhs.

NBFCs tie up with P2P lending firms