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Questions and Answers
What is the main advantage of peer-to-peer lending for borrowers?
What is the main advantage of peer-to-peer lending for borrowers?
What is the regulatory body that regulates peer-to-peer lending in India?
What is the regulatory body that regulates peer-to-peer lending in India?
What is the main purpose of credit rating in peer-to-peer lending?
What is the main purpose of credit rating in peer-to-peer lending?
What is the main characteristic of reward-based crowdfunding?
What is the main characteristic of reward-based crowdfunding?
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What is debt-based crowdfunding also known as?
What is debt-based crowdfunding also known as?
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What is the primary goal of charity donation-based crowdfunding?
What is the primary goal of charity donation-based crowdfunding?
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What is the main difference between equity crowdfunding and debt-based crowdfunding?
What is the main difference between equity crowdfunding and debt-based crowdfunding?
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Which of the following is NOT a type of crowdfunding?
Which of the following is NOT a type of crowdfunding?
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What is one of the advantages of P2P lending over traditional bank loans?
What is one of the advantages of P2P lending over traditional bank loans?
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What is one of the benefits of using P2P lending platforms?
What is one of the benefits of using P2P lending platforms?
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What is one of the disadvantages of P2P lending?
What is one of the disadvantages of P2P lending?
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What is one of the advantages of P2P lending for borrowers?
What is one of the advantages of P2P lending for borrowers?
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What is one of the benefits of P2P lending for lenders?
What is one of the benefits of P2P lending for lenders?
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What is one of the challenges of P2P lending?
What is one of the challenges of P2P lending?
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What is one of the benefits of P2P lending for CORPORATE borrowers?
What is one of the benefits of P2P lending for CORPORATE borrowers?
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What is one of the advantages of P2P lending for borrowers?
What is one of the advantages of P2P lending for borrowers?
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What is the minimum net owned fund required for a NBFC-P2P to operate?
What is the minimum net owned fund required for a NBFC-P2P to operate?
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What is the primary role of a NBFC-P2P in lending?
What is the primary role of a NBFC-P2P in lending?
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What is the leverage ratio limitation for a NBFC-P2P?
What is the leverage ratio limitation for a NBFC-P2P?
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What is the maximum amount a lender can invest in a single borrower at any point of time?
What is the maximum amount a lender can invest in a single borrower at any point of time?
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What is the maximum aggregate loan amount that a borrower can take across all P2P platforms?
What is the maximum aggregate loan amount that a borrower can take across all P2P platforms?
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What is the maximum maturity period for a loan on a P2P platform?
What is the maximum maturity period for a loan on a P2P platform?
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What is the requirement for a lender investing more than ₹10,00,000 across P2P platforms?
What is the requirement for a lender investing more than ₹10,00,000 across P2P platforms?
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What is the scope of activities of a NBFC-P2P?
What is the scope of activities of a NBFC-P2P?
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Study Notes
Peer-to-Peer Lending (P2P)
- P2P platforms allow borrowers to raise money at lower rates without collaterals, while investors earn lucrative returns.
- Platforms provide credit ratings, credit history, and collect interest payments, charging a fee from both lenders and borrowers.
RBI's Regulation of P2P Platforms
- RBI regulates P2P platforms, categorizing them as P2P NBFCs.
- No non-banking institution, except a company, can undertake P2P lending business.
- To operate, a company must obtain a Certificate of Registration, have a net owned fund of at least ₹20 million, and be incorporated in India.
Restrictions on NBFC-P2Ps
- Cannot raise deposits, lend on their own, or provide guarantees to lenders.
- Funds received from lenders or borrowers are not shown as assets or liabilities in the balance sheet.
- Cannot sell products other than loan insurance products.
- International flow of funds is not permitted.
Scope of Activities
- Undertake credit assessment and risk profiling of borrowers, disclosing the same to lenders.
- Document loan agreements and other related documents.
- Assist in disbursement and repayment of loan amounts.
- Provide services for loan recovery.
Crowdfunding
- A concept where businesses pool small investments from many investors instead of seeking a single investment.
- Two main types: Reward-based and Equity-based crowdfunding.
Advantages of P2P Lending
- Lower administration costs and enhanced efficiency.
- No mandatory collateral.
- Cheaper credit.
- Extra flexibility compared to banks.
Disadvantages of P2P Lending
- Lack of legal disclosure of risks for lenders.
- No uniform standards for calculating profit returns.
- Lack of disclosure about platforms and borrowers.
- Lack of transparency regarding credit assessment.
Prudential Requirements
- Maintain a Leverage Ratio not exceeding 2.
- Aggregate exposure of a lender to all borrowers should not exceed ₹50,00,000.
- Lenders investing more than ₹10,00,000 must produce a certificate from a practicing Chartered Accountant.
- Exposure of a single lender to a single borrower should not exceed ₹50,000.
- Aggregate loans taken by a borrower should not exceed ₹10,00,000.
- Loan maturity should not exceed 36 months.
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Description
This quiz covers the concept of peer-to-peer lending, a platform that enables individuals to lend and borrow money without the need for traditional financial intermediaries. It discusses the benefits and services provided by these platforms.
