Will Indian P2P Lending Hit The Wall In The Long Run?

The recent mushrooming of P2P lending websites in India has just made credit much more accessible to everyone, eliminating the lengthy paperwork and cumbersome process. While this is a boon for borrowers, lenders may find themselves in hot water in times very soon to come.

- Sugandh Singh

The P2P Ecosystem

The bone of contention in the business of lending and borrowing is not the amount but the rate. The rate goes high if the risk involved is higher and the risk means, necessarily, someone is going to default in the whole system. The banks are overburdened with demands of loans that they can never fulfill. So they look for most secured applications and disburse loans against fitting collaterals, sometimes rejecting even creditworthy applications. The unfulfilled demand finds its recourse in the unorganized informal market, which through technology, the P2P lending websites are trying to plug themselves in. By model, P2Ps eliminate the requirement of collaterals, essentially facilitating unsecured loans to anyone from anyone in the system while they provide almost no guarantee of repayments.