Ten years ago, P2P lending was an unfamiliar concept to Indian investors, despite its strong presence in developed international markets. When early P2P lending platforms like Lendbox introduced this untapped asset class to India, it didn’t take long for it to gain traction and capture the interest of retail investors nationwide. This increasing attention prompted India’s central bank to establish a regulatory framework in 2017, making a groundbreaking decision to treat P2P lending platforms as Non-Banking Financial Companies (NBFC).
Delhi-based P2P lending platform Lendbox, which obtained its NBFC-P2P license in 2019 and reached an AUM of over ?2700 crores last December, notes a significant surge in registrations from young investors, many of whom are venturing into investing for the first time. According to the platform, the driving force behind this growing interest lies in the nature of investment and word-of-mouth recommendations from existing investors.
P2P lending is fast becoming the ideal choice for new age investors to park their idle capital as the generated returns consistently outpace inflation while also providing significant level flexibility to the investors. The rise of financial literacy through social media has also motivated the tech savvy generation to understand the necessity of portfolio diversification and reduce capital exposure to volatile asset classes.
P2P lending as an asset class in India has evolved to offer stable yields compared to the equity market and while generating higher interest than many other traditional debt instruments hence establishing itself as a unique low risk asset class. This is especially appealing to a demographic that is yet to build an appetite for higher risk and long investment horizons.
Currently, the platform offers investment plans with stable returns of up to 11.57% per annum. The term “stable” is used to underscore the low-risk nature of this investment, given its lack of correlation with market-linked activities, making it a non-market linked investment. Another factor attracting this new generation of investors is the relative ease of investing compared to the equity market and other popular investment options, with no specific requirements such as a demat account.
The only notable restriction is that as per RBI guidelines, an investor can only deposit a maximum amount of up to ?50 lakh on one P2P lending platform, requiring a net worth certificate to invest beyond ?10 lakh. While this investment cap might pose a challenge for deep-pocketed investors, it is not a significant hurdle for young professionals. Basic KYC documents are all that is required for them to initiate investments on a P2P lending platform.
The platform’s portfolio performance has also played a pivotal role in fostering user loyalty. Lendbox explains that this consistency in performance is achieved through its robust lending mechanism establishing an infrastructure where invested capital is routed through trustee backed escrow accounts and disbursed to a vastly diversified set of loans verified through rigorous credit screening. The advancements in credit assessment methods and implementation of AI based screening technology effectively helps in creating a high quality loan book.
The P2P lending industry in India is projected to surpass a $10 billion market size by 2026. The growing interest across various demographics in the country has attracted significant attention from major financial players, leading to new collaborations and partnerships regularly making headlines.
Disclaimer : Above mentioned article is a Consumer connect initiative, This article is a paid publication and does not have journalistic/editorial involvement of IDPL, and IDPL claims no responsibility whatsoever.
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Why P2P lending platforms like lendbox are attracting new age investors?
