P2P lending ; a 5 year journey
Context :
P2P lending machine firing on all cylinders amid slackened bank loan disbursals / 24 Oct 2021
Extract :
It has never been better for peer-to-peer (P2P) lending platforms, which are seeing a considerable increase in the number of people wanting to lend or borrow money. While slackened loan disbursals by banks and other institutional lenders have driven borrowers to peer-to-peer lenders, low fixed-income returns are prompting rich investors to lend money on these platforms at rates ranging from 10% to 18% per annum.
P2P lending is the practice of lending money to individuals via an online platform that connects lenders with borrowers.
This mode is useful for both lenders and borrowers because the former can earn a higher interest rate (than bank savings account or many other debt instruments) and the latter can obtain funds (unsecured loans) at lower rates than what banks or nonbanking financial companies (NBFCs) offer.
India has nearly 20 P2P lenders, with a combined outstanding loan book of around Rs 5,000 crore. These entities are regulated by the RBI.
We do nearly 130 crore worth of loan disbursals every month. Over the past one year, we have grown over 30 times, said Rajat Gandhi, founder and CEO of Faircent, which claims to have a loan book worth 2,000 crore.
Our volumes shot up after we rolled out a string of new products for both lenders and borrowers. At a portfolio level, we are able to deliver 12-15% returns, after adjusting for expenses and defaults, he adds.
The bulk of the lenders filling up the rosters of prominent P2P platforms are return-hungry retail investors and traders with surplus cash flows.
Several high net worth individuals and family offices are writing large cheques favouring borrowers on these platforms.
They are prompted to lend on platforms because their traditional fixed-income investments - such as bank fixed deposits, savings accounts, debt MFs, debentures and corporate FDs - are yielding 3-7% on an annual basis.
My Take :
Ø P2P Lending Regulations ……………………….[ 29 April 2016 ]
Extract :
As against this, the cumulative total loans taken by some 630,000 borrowers from some 900,000 lenders in China , add up to Rs 11 Lakh*Crore from 2600 , P2P platforms !
I had only a cursory glance at the RBI guidelines but could not find answers to following questions :
* Can " Companies " register on P2P platforms as either Lenders or as Borrowers ?
I suppose , RBI's answer would be " NO " - even if it is a Peer-to-Peer transaction between two entities ( bypassing the regular middlemen ie: Banks )
Would that proscribe tiny " Start Up Companies " to join P2P platforms ?
Somehow, that does not sound right !
* Can American / European / Japanese citizens become lenders on Indian P2P platforms and lend money to
Indian borrowers ?
Once again, I am afraid, RBI will say, " Sorry , No ! "
Of course , it is safe to say, " No " since RBI does not want P2P phenomenon to " disrupt the existing banking channels "
Reason ?
Countries of the world making up almost 56 % of World GDP , have 0 % - 1 % interest rates ! That covers America / Europe / Japan
In some cases , there are NEGATIVE interest rates , meaning :
Instead of earning an interest when you put your money in Fixed Deposit in those Foreign banks , in these countries , banks will charge you a small fee to " safe-keep " your money !
And banks will pay YOU some small amount for taking out loans !
Given this scenario , it is to be expected that rich citizens of these foreign countries would just LOVE to become lenders ( to Indian borrowers ) and earn, even as low as 5 % interest , on Indian P2P platforms !
And Indian borrowers would LOVE to take loans only from such FOREIGN lenders who have very LOW expectations by way of interest !
Remember that today, an Indian borrower would pay around 15 % by way of interest to an Indian Bank for short term loans
As against this, the " Average interest rates " on P2P platforms hover around 8.6 % globally
So allowing Foreign individual citizens to register as lenders on Indian P2P platforms, would result in a win-win situation for both !
Who knows , the amount of foreign funds arriving into India through this route ( call it FDII - Foreign Direct Investments to Individuals ) , could even exceed FDI !
QUESTIONS :
Ø Can our P2P lending system, overtake the Chinese system ? If so, when ?
To be able to overtake the Chinese, we need following :
# All payments above ( say for example ) Rs 500 / , must be made DIGITALLY – and based on UPI.
Hopefully, in such a situation, 95 % of sale / purchase transactions will become DIGITAL . This will
enable UPI to build-up every person’s LIFE LONG PURCHASE HISTORY ( goods or services )
# Based on that, UPI to develop each person’s CREDIT RATING / CREDIT SCORE
# When any person “ applies “ for a loan on any P2P lending platform, UPI will make available ( to
that platform and for that loan application only ), concerned applicant’s CREDIT SCORE at that
moment
# This data will enable that P2P platform to approve or disapprove that loan application
# In case of “ approval “, this CREDIT SCORE data will enable the P2P platform to specify ( may be
automatically, through use of an algorithm ) :
= Loan amount being sanctioned
= Interest Rate applicable
= Moratorium if any
= EMI / total period etc
Ø Is there any indication of emergence of such a scenario ?
Yes . These are :
[ A ]
Birth of a Black hole ? …………………………..[ 18 Jan 2021 ]
Extract :
What data will not be able to escape this black hole ?
STAGE 1
To begin with, your entire PURCHASE HISTORY of a life-time, comprising :
WHAT you purchased - WHEN – from WHOM – at WHAT PRICE – HOW much qty., – how PAID for
STAGE 2
Next, it will compile data about each unique item that you ever purchased – and some more :
Ø Frequency of Purchase
Ø Package Size
Ø Brands ordered
Ø Mode of Delivery
Ø Mobile Number ( and, may be all of your CONTACT DATA – to entice your friends / family )
Ø Your MONTHLY CONSUMPTION RATE for each item ( and by using AI, size of your family )
Ø Whether you are single or married ( does not require sophisticated software ! )
Ø If married, number – and age – of your children
Ø Your bank ( - and your bank balance ? You bet ! )
[ B ]
Explaining e-RUPI ? But end up Confusing ? [ 02 Aug 2021 ]
Extract :
In this entire process, is there ( even a remote ) possibility that either the Government or the Issuer’s Bank or the Service Provider’s Bank or NPCI , would be able to continuously / dynamically compile following Database ( without having to SNOOP or ask for anyone’s PERMISSION ) :
# WHO purchased ( each beneficiary )
# WHAT purchased ( goods or services )
# WHEN purchased ( Date=Month-Year )
# WHAT price purchased ( Rupees per Unit )
# WHERE purchased ( details of each Service Provider )
I urge Smt Sitharamanji / Shri Piyush Goyalji to :
# Prepare an OFICIAL / AUTHENTIC process of e-RUPI and publish on several online / offline media
# Avoid any possible allegations of snooping / surveillance / compilation of
LIFE-LONG BUYING HISTORY of millions of beneficiaries ,
by making clear statements in Lok Sabha
[ c ]
Crypto : Corruption : Corona : China ………………..[ 17 June 2020 ]
Extract :
What will convince RBI / Government to issue OFFICIAL VIRTUAL CURRENCY ?
Here is a brief ( non-comprehensive ) suggestion for proposed Law :
Ø While banning Private Crypto, introduce IndiaBit ( Govt Virtual Currency )
Ø With some effective date , withdraw all Paper Currency ( forget coins )
Ø Minimum denomination will still be called a RUPEE ( easy to convert from paper to digital )
Ø As of a date , bank balances in everyone’s bank account gets converted to IndiaBits
Ø Set time limit within which people can deposit their paper currency into banks for instant conversion
into IndiaBits
Ø After set date, paper currencies held by anyone ( individual or any legal entity such as a Company ),
loses all value and become illegal for any sell / purchase transaction
Ø All future financial transactions ( sell / buy of any goods or services ) can only be through mobile-app
based DIGITAL transactions
Ø Since all transactions will become DIGITAL , Govt would have full / life-time LOG of each citizen’s “ Sale or
Purchase “ [ Who bought What , When , from Whom , at What price , Where etc ] .
Ø Here is why automatic compilation of such CONSUMPTION DATA for the entire economy, will be a GAME
CHANGER :
Economic data will help policy ……………………………… 16 June 2020
I have no clue as to what mechanism could be used ( Inter-Currency Exchange Rate ) for payment for
Imports and remittances for Exports , if – and when – we introduce IndiaBit
But if IndiaBit can ,
# To begin with bring out all BLACK MONEY ( stashed away as paper currency notes ), and deploy the same
into mainstream economy for productive purposes , and
# Put a Full Stop to any future generation of Black Money ,
- then my proposal deserves a debate
with regards,
hemen parekh / hcp@RecruitGuru.com / 25 Oct 2021
With regards,
Hemen Parekh / 25 Oct 2021 / hcp@RecruitGuru.com
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