From Borrowers to Investors: Understanding the Dynamics of P2P Lending with Pavitra Pradip Walvekar


P2P lending is revolutionizing Indian finance, blending technology with financial inclusion - Pavitra Pradip Walvekar

In the ever-evolving landscape of finance, Peer-to-Peer (P2P) lending has emerged as a transformative force, redefining the dynamics of borrowing and lending. This innovative financial model facilitates direct connections between individuals or businesses seeking funds and investors looking for investment opportunities. Let us explore the essence of P2P lending, its fundamental principles, and its remarkable rise as a dynamic and accessible alternative in the financial landscape with  Pavitra Pradip Walvekar , the Pune-based promoter-director of Kudos Finance and Investments Private Limited.

P2P lending operates through online platforms that eliminate the need for traditional financial intermediaries, creating a decentralized and inclusive system. The emergence of P2P lending represents a departure from conventional banking structures, offering a more direct and streamlined approach to accessing capital. Over the past decade, P2P lending has gained significant traction globally establishing itself as a vital player in the financial technology (FinTech) sector.

According to a report by PwC, P2P lending in India is anticipated to reach a valuation of USD 4 billion by 2026. However, in comparison to China, where the sector has already surpassed an impressive USD 100 billion, the Indian projection underscores the potential for further growth and development within the P2P lending industry.

How P2P works

Peer-to-peer (P2P) lending functions as an online intermediary platform that directly connects borrowers and lenders, streamlining the lending process. As prospective lenders open accounts on the P2P platform, borrowers seeking loans also register, creating a dynamic marketplace. The evaluation of borrowers extends beyond conventional credit scores, incorporating a comprehensive analysis of factors such as employment, income, credit history, and other pertinent details. Employing advanced technology, P2P platforms leverage social media activities and app usage patterns to further gauge borrowers' habits.

Upon this thorough assessment, borrowers are categorized into distinct risk buckets, determining the applicable interest rates. The creditworthiness of a borrower becomes a key factor in this categorization, with lower rates for those deemed more creditworthy and higher rates for those with lower creditworthiness. Lenders, equipped with this information, can peruse the platform's assessments of various borrowers and strategically allocate their funds based on the desired risk-return profile.

Similarly, borrowers have the opportunity to review the profiles of potential lenders, facilitating a mutually beneficial connection. P2P platforms do not retain a margin from the transactions between lenders and borrowers. Instead, they charge fees to both parties for the services rendered. 

Emphasizing the inclusivity of P2P lending Pavitra Pradip Walvekar says, “P2P lending allows even modest investors to actively participate. Small and Medium Enterprises (SMEs), facing challenges in securing financial support from traditional banks, find P2P lending platforms a viable alternative. The streamlined efficiency and speed of P2P lending redefine the borrowing experience, providing quicker access to funds compared to traditional banking processes.” Further discussing P2P lending Pavitra Pradip Walvekar suggests caution, “many people attracted by the high returns often forget to do their due diligence which leads them to losses. Every enticing opportunity must be weighed with caution.”  

To uphold integrity and prevent fraudulent activities, such as misappropriation of funds, the Reserve Bank of India (RBI) regulates P2P platforms, ensuring transparency and accountability within the lending ecosystem.

Peer-to-peer (P2P) lending service providers commenced operations in India as early as 2014; however, the sector operated without regulatory oversight until 2017. In September of that year, the Reserve Bank of India (RBI) announced its decision to classify these entities as non-banking financial companies (NBFCs) and concurrently issued comprehensive guidelines to govern their operations.

All P2P entities, whether existing or non-NBFC, are required to undergo registration with the Department of Non-Banking Regulation in Mumbai. Additionally, P2P lenders must secure a certificate of registration from the Reserve Bank of India (RBI). To ensure regulatory compliance, P2P platforms are mandated to maintain a minimum net-owned fund of Rs 20 million, alongside meeting other stipulated conditions outlined by the RBI.


Pavitra Pradip Walvekar , “In the past decade the Fintech industry has boomed exponentially with an adoption rate of around 87% which goes to show that Indians are ready to welcome new changes and adopted a more decentralized way of investment and money management. P2P can be the new disrupter but it will require constant intervention from government and more stringent regulations from RBI.” 

Talking about data security Pavitra Pradip Walvekar explains, “Users of P2P platforms face persistent vulnerabilities to scams and phishing attempts. Fraudulent activities, including impersonation of legitimate recipients, pose a risk of users inadvertently transferring funds to the wrong account. Effective mitigation involves raising user awareness and promoting adherence to security best practices, such as diligent verification of recipient information and safeguarding login credentials. Additionally, selecting a secure payment processor with advanced security features is paramount to fortifying the system against potential threats.”

P2P platforms have the potential to revolutionize how individuals and businesses access capital. With its efficient, technology-driven model and regulatory support, P2P lending not only addresses the gaps in traditional banking but also positions itself as a promising cornerstone in shaping the future of finance in India. As the sector continues to grow, we can hope that it will play a focal role in fostering financial inclusion and reshaping the dynamics of borrowing and investing.

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