RBI Fines Four P2P Lending Websites For Non-regulatory Compliance

The Reserve Bank of India (RBI) has imposed monetary fines on four Peer-to-Peer (P2P) lending websites for not adhering to regulatory requirements. The offending companies—Rang De P2P Financial Services Limited, Fairassets Technologies India Private Limited (Faircent), Visionary Financepeer Private Limited, and Bridge Fintech Solutions Private Limited (Finzy)—were guilty of violating the Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017. RBI penalised these companies for operational and regulatory lapses following scrutiny.

Regulatory Violations and Impositions

The fines, which total over Rs 76 lakh, were imposed based on RBI’s findings after a supervisory review conducted in September 2023. Each of these companies was found to have violated one or more key provisions that govern the operations of NBFC-P2P platforms.

Rang De P2P Financial Services Limited was fined Rs 10 lakh. The primary contravention was disbursing loans to individual borrowers without obtaining the approval of individual lenders. RBI states that this lapse is in contravention of the basic principle of P2P lending, where lenders are entitled to have absolute control over where their funds are being utilised. Faircent was fined a maximum of Rs 40 lakh for multiple contraventions. The company not only extended loans without the approval of lenders but also failed to carry out proper credit checks of the borrowers. It did not disclose borrower risk profiles to potential lenders, a critical requirement to ensure transparency in P2P lending. 

Faircent also took on partial credit risk by waiving or reducing management fees, as against the regulatory policy that prohibits P2P platforms from undertaking financial risk. The company was also observed to have misdirected funds transfer, allowing repayment of the loans from a pool of money instead of providing for a direct transaction between borrower and lender. 

Visionary Financepeer Private Limited was charged Rs 16.60 lakh for a series of regulatory lapses. It did not take the approval of lenders before disbursal of the loans and did not maintain that each of the transactions contained a current loan agreement between the borrower and lender. The company was also not clear in borrower disclosure and lacked a board-approved policy for the pricing of services.

Financepeer was also found to have taken partial credit risk, which is strictly not allowed as per P2P lending guidelines. The firm also did not comply with RBI guidelines for supervision of third-party service providers by not including minimum inspection rights in its contracts and by not having annual reviews conducted. 

Bridge Fintech Solutions Private Limited, which operates under the Finzy brand name, was fined Rs 10 lakh for the same infractions. It disbursed loans without lender consent, took partial credit risk, and failed to include RBI’s inspection rights in agreements with service providers. The company also did not conduct periodic reviews to ensure compliance with RBI’s Fair Practices Code and lacked proper oversight of its grievance redressal mechanism.

RBI Regulatory Action and the Consequences

RBI levied the penalty under Section 58G of the Reserve Bank of India Act, 1934, which empowers RBI to take enforcement action against regulated financial institutions. Following the completion of its scrutiny process, RBI issued show-cause notices to the four entities, asking the companies to explain why penalties shall not be levied. The companies submitted responses and additional clarifications, and personal hearings were conducted.

But RBI held that the non-compliance was serious enough to warrant monetary penalties.

The central bank clarified that such penalties are precisely concerning non-compliance and not the illegitimacy of the financial transactions of the companies with customers.

However, the move serves as a reminder that online lending platforms must remain within the legal and regulatory watch provided by RBI. This crackdown reflects RBI’s continued efforts to bring transparency and accountability to the P2P lending sector. Over the past few years, the sector has grown rapidly, attracting both individual lenders and borrowers who seek alternatives to traditional banking channels. While digital lending platforms provide convenience and flexibility, they also carry risks, particularly when regulatory safeguards are not followed.

The penalties highlight the need for P2P lending companies to improve their compliance mechanisms. Ensuring proper credit assessments, maintaining transparency in borrower-lender transactions, and adhering to RBI’s fund transfer mechanisms are critical to maintaining investor confidence in the sector. Non-compliance not only attracts regulatory action but also erodes trust among users.

Stronger Oversight in the Digital Lending

RBI’s scrutiny of P2P lending platforms is part of a broader effort to regulate the growing digital lending ecosystem in India. In recent years, concerns over mismanagement, high-risk lending practices, and opaque fund transfers have prompted the regulator to tighten its grip on the sector. The central bank has introduced several guidelines to protect investors and borrowers, ensuring that fintech platforms operate with fairness and transparency.

The recent action sends a strong message that RBI will not hesitate to penalise violations, particularly those undermining investor protection. As online lending becomes more popular, platforms must ensure they follow RBI guidelines very stringently so that they do not attract similar enforcement action in the future.

For lenders and borrowers alike on such websites, this regulatory move is a cautionary signal. It is a warning to check the authenticity of P2P websites before engaging in financial transactions. Transparency, regulation, and safe lending will be the keys to sustaining the development of the P2P lending industry while retaining the confidence of regulators and consumers alike.