Sources said that following a review of the operations of peer-to-peer (P2P) platforms, certain issues including high nonperforming asset levels, significantly high balances in escrow accounts, and non-compliance with net owned fund and disclosure requirements came of to the regulator's attention.
The violations of regulatory guidelines were confirmed through supervisory scrutiny, and the regulator dealt with some of these platforms bilaterally for remedial action.
According to sources, the operating model of P2P lenders, which was reviewed by the regulator, revealed that these platforms provided lenders with the option to recall their funds prematurely by replacing them with new lenders who did not have visibility into the existing lenders they would replace or the loans they were taking over.
This kind of operating model, where lenders do not bear the entire risk of non-repayment of principal or interest or both, is akin to Ponzi schemes, sources said, which prompted the regulator to tighten the norms.
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