When peer-to-peer (P2P) lending platforms were getting off the ground in India in 2015, Ashish Bansal was among the first people to get on board. Like investors in countries like the US and China, he saw promise in these platforms’ premise. They paired willing lenders—usually high-income individuals such as Bansal—with borrowers that banks and other financial institutions didn’t want to touch.

In exchange for taking on risky borrowers, lenders got to charge higher rates of interest, potentially enjoying returns of over 25%. For Bansal, an angel investor in his own right and a high-ranking corporate executive for the last decade, it seemed like a no-brainer. 

The way Bansal tells it, he was among the biggest lenders on India’s most prominent P2P platforms in the early days. This was a time when P2P lending was akin to the Wild West. Little regulation, lots of action, and the heady lure of massive bounties to be had for those brave enough to take the plunge.

Bansal was presented with borrower information that had been collated by platforms, and allowed to pick who he would lend to. All told, he invested a small fortune—more than Rs 70 lakh ($95,808)—across platforms like Faircent, Lendbox, i2iFunding, and LenDenClub. 

A lot of that money never made it back to Bansal. A few years into embracing P2P lending, the cracks began to show. Borrowers began to default, and with lenders, not platforms, liable for losses, Bansal was left carrying the can. As he began looking into defaulters, systemic shortcomings became apparent. Bansal claims that the personal details given by borrowers were incorrect. In other instances, he told The Ken, borrower payments were not recorded by the platforms.

Stung, Bansal stopped his P2P lending altogether. The defaults, though, kept adding up. He claims they’ve eaten up close to half his investment. Today, he is fighting numerous court cases against defaulters in the hope of recouping some losses.

Bansal is no outlier. We’d written in 2018 written in 2018 The Ken Some of the biggest lenders on peer-to-peer lending marketplaces were staring at defaults from 20% all the way up to 50%. Read more  about growing anger amongst lenders on P2P lending platforms, all of whom had similar stories to Bansal. It was enough to make the Reserve Bank of India (RBI)—the country’s central bank—sit up and take notice. In 2017, regulations were put in place, limiting individual exposure to any one borrower to Rs 50,000 ($684), and also putting a cap on how much a lender could offer across P2P platforms—Rs 10 lakh ($13,686).

AUTHOR

Pranav Balakrishnan

Pranav writes about the business of moving people and things around, i.e, mobility and e-commerce. Over the past two years, he has written about Ola, Tesla, Flipkart, Amazon, and the increasing role played by Reliance Industries in the Indian technology story. Pranav joined The Ken from Asian College of Journalism, Chennai, specialising in business journalism.

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