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Banning of Unregulated Deposit Schemes (UDS) to benefit P2P Lending Industry

Mumbai, 27 Feb 2019: The latest ordinance of the Banning of Unregulated Deposits (UDS) 2019, was passed by the government to provide a comprehensive mechanism to ban UDS as well as to protect the interest of depositors. This is in line with the Reserve Bank of India’s guidelines on the NBFC-P2P sector, issued in October 2017 to regulate the unorganized lending business in the country.


The latest ordinance focuses on unregulated deposits only. The essence of the ordinance is that the transactions that cannot be formally audit trailed will no longer be allowed. The appointed Competent Authority has right to inspect, examine documents, and even summon the involved individuals/parties.


With the ban on unregulated deposits, players of P2P lending industry are expecting that it will attract attention of such small investors to invest though regulated institutions like NBFC-P2P platforms that provide highly transparent environment under the guidance of the RBI. This will also motivate small borrowers to do transactions through certified financial institutions only.


“In the wake of new ordinance, P2P lending players are likely to gain ground and the ordinance will have a positive impact on P2P industry in long run. The industry is at nascent stage currently and such a positive step will help this lending industry to establish itself as one of the best investment option in the market. In India, a lot of people & SMEs are heavily dependent on informal resources for their needs where transparency has always been an issue. It is time for P2P lending players to move ahead with awareness campaigns to onboard such depositors to digital India economy through regulated platforms which are highly transparent and secured.”


“All unregulated deposits would now have regulated route that will not only help in boosting digital economy but will also help in increasing the taxable income. Needless to say, P2P lending industry is poised to be a USD 5 Bn industry by 2023 and can play a key role in financial inclusion & building a corruption free nation”, said Mr. Rajiv M Ranjan, Founder & CMD PaisaDukan.


“This ordinance will help P2P lending sector in more ways than one. Firstly, all transactions carried out on NBFC-P2P lending platforms are regulated by way of P2P master guidelines set by the RBI. I believe this will increase demand for formal credit and should be an upside for the P2P lending sector. NBFC-P2P lending platforms can become a formal route for many of the small-ticket informal transactions that are normally ridden with high transaction costs and significant collateral needs. P2P lending can finally emerge fully as a new asset-class for individual lenders in India”, said Mr. Sanjay Darbha, Founder & CEO of Hyderabad based P2P lending platform PeerLend.


“There are a many salaried individuals and SMEs who borrow from small brokers and payday lenders at a very high interest rates. All these small players who have enjoyed such lending business without legal norms would now fear the law and eventually seize to exist. We are covered under the ordinance, being a regulated player by the Reserve Bank of India and we strongly believe that there is an opportunity for P2P players to tap such loan seekers and provide them better services and interest rates. P2P will not only aggregate this disorganised lending segment but also create a great asset class for the common man. ,” said Mr. Dhiren Makhija, CEO of Bengaluru based P2P lending platform Cashkumar.

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