According to the updated master direction from the RBI, P2P platforms are now prohibited from promoting peer-to-peer lending as an investment product featuring assured minimum returns linked to tenure or liquidity options.
Additionally, NBFC-P2P platforms are barred from cross-selling any insurance products that serve as credit enhancement or guarantees.
The guidelines also stipulate that no loan can be disbursed unless lenders and borrowers are matched or mapped according to a board-approved policy.
While the RBI initially issued guidelines for P2P lending in 2017, it has recently identified certain non-compliant practices by some platforms that violate these regulations.
"Such practices include, among others, violation of the prescribed funds transfer mechanism, promoting peer-to-peer lending as an investment product with features like tenure linked assured minimum returns, providing liquidity options and at times acting like deposit takers and lenders instead of being a platform," it said.
In view of violations by some entities, the RBI issued amended guidelines. The revised guidelines come into effect immediately.