RBI Imposes ₹3.91 Crore Penalty On Lenden Club And Liquiloans For Regulatory Violations In P2P Lending And Digital Practices

The penalties were imposed after the RBI conducted statutory inspections of these NBFCs, during which multiple compliance issues were discovered. The inspections revealed that both companies failed to adhere to critical provisions of the "Non-Banking Financial Company - Peer to Peer Lending Platform Directions, 2017" and the "Guidelines on Digital Lending" issued by the RBI.

One of the finding by RBI was that both Innofin Solutions and NDX P2P did not provide necessary personal details such as credit assessments and risk profiles of borrowers, to prospective lenders. This lack of transparency is a significant violation as it prevents lenders from making informed decisions about the risks associated with the loans they are funding.

Additionally, both NCFCs were found to have disbursed loans without obtaining specific approval from individual lenders. This practice contravenes the regulatory requirement that each lender must approve the loans being issued through the P2P platform.

Another issue identified by the RBI was the routing of disbursed and collected loan amounts through co-lending escrow accounts which violated the prescribed fund transfer mechanisms. According to the RBI's regulations, NBFCs operating as P2P platforms are required to follow a specific process for transferring funds between lenders and borrowers.

Further, both companies were found to have routed repayments for merchant finance loans through the nodal account of a third party, which acted as a lending service provider.

In the case of NDX P2P, the RBI also noted that the company took on partial credit risk by waiving service fees either partially or fully, which is not allowed under the regulations governing NBFC-P2P companies.

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