RBI EXPLORING INNOVATIVE MODES OF FUNDING: “PEAR TO PEAR LENDING”

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Business Mantra: Faridabad

Apart from conventional mode of funding, the other modes of funding, gaining popularity in India is Equity Funding (By Individuals, Companies and Venture Capitalists etc.)

Finance Regulator- RBI has given signals to regularize the irregular finance deals across the country i.e. Lender to Borrower direct funding – Pear to Pear funding. This kind of funding is not so common in India. Only some companies named Land Box and i-2-i Funding are among the few companies working in India.

There may be a regulatory platform, so that both the lender and the borrower should work as per the regulator’s policies.

Both lender and the borrower would pay fees to the regulator and the situation may be like that a borrower would invite bids for his finance requirements and the lenders would bid for it with rate of interest and other terms and conditions. It may be seen as a mode of crowd funding also that a borrower’s demand may be met by a number of lenders.

It is already a developed way of funding in countries like USA, UK etc. although countries like Japan and Israel have banned it.

In India, direct funding by lender to borrower in general public is very much open and according to few estimates, this unregulated and unaccounted mode of funding is more than the total funding of all Banks and NBFCs in India. So regulating this practice would be in the interest of both lenders and the borrowers.

RBI and the Government of India may think to make a separate regulator on the lines like SEBI or the regulatory body may be consortium of Banks along with experts and successful entrepreneurs of various industries. Banks have good experience in financing decisions. Industry experts and entrepreneurs would be able to understand actual situation of borrowers, not only the projected ones.

RBI has already issued consultation paper on “Pear to Pear Lending” in the last week of April, 2016. Last year RBI gave licence to Eleven Payment Banks. So it can be said that RBI is exploring innovative modes for institutions and finance policies in Indian Financial Sector.

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