Definition
P2P Lending
Peer-to-peer lending is an RBI-regulated model where individuals lend directly to other individuals through an NBFC-P2P platform, which matches lenders and borrowers.
On an NBFC-P2P platform, retail lenders fund loans to borrowers and earn interest, while the platform handles matching, documentation, collection and servicing but does not lend from its own books or guarantee returns.
RBI caps the total a single lender can deploy across all P2P platforms and limits exposure to any one borrower, to contain risk. Returns are not assured and depend entirely on borrowers repaying; defaults directly reduce the lender's returns.
P2P lending can offer higher yields than deposits but carries real credit risk and limited liquidity, so it suits only the risk-aware portion of a portfolio.
Related terms
- Digital Lending GuidelinesRBI's Digital Lending Guidelines are rules that govern app- and platform-based lending in India to ensure transparency, fair practices and protection of borrowers' data.
- Invoice DiscountingInvoice discounting as an investment lets you fund a business's unpaid invoices in exchange for a return when the invoice is paid; it carries credit and platform risk.
- Corporate FDA corporate fixed deposit is a deposit with a company or NBFC offering a fixed interest rate, usually higher than bank FDs, but without bank-style deposit insurance.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.