Peer-to-Peer (P2P) lending in India

• Fintech platform CRED Friday announced the launch of a peer-to-peer (P2P) lending feature called CRED Mint.
• The service will allow the company’s users to lend money to other users and make a 9% interest per annum on the amounts they give out as loan.
• The fintech platform partnered with Liquiloans, an RBI-registered P2P non-banking financial company (NBFC), to launch the product service, .

Peer-2-Peer lending

• P2P lending is not a new feature.
• In 2017, the Reserve Bank of India had brought this service under its regulatory purview.
• In P2P lending, users sitting on idle money provide loans to potential borrowers identified by the service provider.
• These lenders then receive payments from the borrowers on a set basis — either one time, or in equated monthly instalments.

Risks associated with P2P lending

• One of the biggest risks associated with it is the non-repayment of loans.
• Given that P2P lending is a form of unsecured loan, there is no guarantee put up by the borrower for the lender to redeem in case of a default.
• However, the unsecured nature of the loan is also the reason behind the high return on investment compared to other debt instruments.