Peer-to-peer lending gains traction in India

Chennai: In March this year, when he wanted to raise some quick money to meet business needs, Bharat Mendiratta decided to get online. Of course, the Delhi-based entrepreneur wasn’t up to any gambling. Instead of approaching a traditional bank or a microfinance lender, Mr Mendiratta registered himself with Faircent.com, a marketplace where borrowers and lenders interact directly.

Within 10 days, he raised the money he needed. “If I had gone to a bank or a finance institution, I would not have got the money in such a short span. Moreover, the banks need a lot of documents for approving a loan,” said Mr Mendiratta . He is among the many thousands who are using peer-to-peer (P2P) lending technology platforms to raise loans, signalling a steady growth in the popularity of the alternative finance system in this part of the world. “These platforms work like e-Bay,” explained Frank Farral, lead partner, Customer Practice Deloitte Digital.

Someone with extra money can lend in P2P technology platforms without putting the money in a bank and can earn good interest. Those who want to take loans can directly approach the lenders via these platforms and place their request,” he said. These platforms charge an upfront fee from both lenders and borrowers.

Once a borrower puts in a request on the platform, the portal will run a credit check and provide a risk rate. The borrower can get money from more than one lender.“The whole idea is very nascent in India. Growth opportunity here is very high.” said Rajat Gandhi, Founder and CEO, Faircent.com.The firm started operations two years ago and is experiencing a 100-per cent growth month on month. “We have nearly 2000 lenders and 1000 borrowers registered with us,” he said. “There is a risk involved and we cannot assure a 100 per cent guarantee,” Mr Gandhi revealed.