P2P lending sector in India faces significant decline

The peer-to-peer (P2P) lending industry in India has seen a sharp decline over the past year. This downturn is largely due to the stricter regulations imposed by the Reserve Bank of India (RBI). The total assets managed by P2P lending platforms have dropped from about Rs 10,000 crore a year ago to roughly Rs 3,000 crore now. Many leading companies in the sector are facing an uncertain future. The RBI's new rules have affected high-growth companies like LenDen Club, Liquiloans, Faircent, and Lendbox. These platforms have struggled to comply with the regulations. As a result, fewer new loans are being processed, and major platforms have stopped onboarding new borrowers. In June, the RBI introduced new guidelines that prohibited platforms from guaranteeing fixed returns. The central bank fined Liquiloans and LenDen Club Rs 1.9 crore each for not following these regulations. Many fintech partners that previously collaborated with P2P platforms have also begun to close down their P2P operations. The RBI has acknowledged that bad loans in the P2P sector total Rs 1,163 crore. Although there has been no public update on the total assets managed in the sector, industry estimates had previously suggested it was around Rs 6,500 crore. Industry insiders are urging the RBI to permit secondary market transactions to help protect investor interests. These transactions previously offered instant liquidity to investors, which was a key draw. However, many companies are finding it challenging to meet new regulatory demands, causing further disruption to their operations. Currently, firms like LenDen Club are still issuing short-term loans but have seen a decline in loan disbursements this year compared to previous quarters. Meanwhile, Lendbox is shifting its focus to wealth management through a new platform called Per Annum.