Budget 2023: Incentivizing P2P lenders with tax exemptions up to a certain income will stimulate growth

Bhavin Patel, Co-founder & CEO, LenDenClub talks about theP2P lending landscape and his expectations from the upcoming budget

ET Edge Insights caught up with Bhavin Patel, Co-founder & CEO of LenDenClub, a Peer-to-Peer (P2P) lending platform. Patel stated that the RBI has been actively involved with India’s P2P lending participants since 2017 and has provided regulatory guidelines on time. This highlights the RBI’s optimism and contribution to the growth of the P2P lending ecosystem.

Edited excerpts

Q) Globally, P2P lending space is growing at a CAGR of 48% and is expected to reach $800 plus billion by 2024.What explains the growth of the P2P industry in India?

The growth is driven by the investments brought by investors of P2P lending platforms. The investment diaspora has witnessed a behavioral shift of wealth creation this year, where investors are searching for new opportunities to earn better returns. P2P lending is an alternate investment class that investors can look into to diversify their portfolio.

During an economic downturn asset classes such as gold, bonds, and fixed/debt instruments are more stable. But some of these may not be attractive in terms of returns. On the other hand, Peer-to-Peer (P2P) lending is a new-age non-market linked instrument backed by technology and has emerged as a preferable asset class that provides high returns. If we look at the Indian market, the last 2 years growth has been more than 5X. That’s a phenomenal growth rate and it will continue for a few more years.

Q) P2P lending has emerged as an alternative investment class. What kind of growth do you see for the sector to grow in the coming years?

The Indian P2P lending market is expected to grow to $10 Billion by 2025-26; however, I see this happening much sooner because P2P lending companies will offer distinctive fusion of cutting-edge technologies and speedy financial solutions to strengthen the alternate investment path for investors of India as well as fulfill the unmet credit needs of the Indians.

LenDenClub has witnessed a 100% increase in the number of investors on the platform in the last calendar year. With more than 20 lakh investors with an average ticket size of more than Rs 80,000, we only see an increased demand for investment in P2P lending.

Q) You have recently introduced a VC arm LenDenClub Alpha. Please throw some light on its strategic benefit to the company?

LenDenClub Alpha is not a VC Fund. It’s a startup support program launched along with the corporate venture capital of LenDenClub in 2022. I firmly believe that the holistic synergy between investors and startups leads to incredible success. In a truly collaborative partnership, the financial aspect is just one part of an ecosystem where each side can actively work to benefit the other.

Our goal with LenDenClub Alpha is to identify and nurture startups whose Fintech solutions can help our customers while actively looking for ways their innovations can boost efficiency within our company.

Q) What kind of growth vision are you looking at now with various regulations that have come into place?

The RBI has been positively proactive with the P2P lending players in India and has timely provided regulatory guidance since 2017. This is a proof of RBI being optimistic and aiding in the growth of the P2P lending ecosystem. The various regulatory measures have played a crucial role in boosting confidence among borrowers and lenders while enhancing the transparency mandate which will lead to higher penetration, soon making P2P lending investments a household name.

LenDenClub is India’s largest Peer-to-Peer lending investment platform with more than 50% of the market share. With the increase in trust and the government’s emphasis on financial inclusion with digitisation, we have been witnessing an increase in demand with an increased average ticket size of investment. The LenDenClub platform has grown by more than 15X in the last 2 year’s time. This only indicates an exponential growth of P2P lending in India in the coming years.

Q) What kind of benefits from the budget would you like to look at in your wishlist?

The government’s efforts to achieve financial inclusion in India is remarkable. In addition to that, a specialized government vehicle providing procedural aid to the legal recovery of repayments for the FinTech industry could not only help startups run more effectively, following compliance requirements, but it would eliminate possible fraudsters.

P2P lending has evolved as an exceptional instrument to enable the flow of investments from those with excess to those in need. While we work to meet the country’s credit demands, we need assistance from the government to open the investment side by incentivising P2P lenders with tax exemptions up to a certain income.

And to cater to the increasing demand, setting up avenues for advanced technical education is the need of the hour. Today, India requires technical and financial professionals to conduct the Fintech revolution. Therefore, more f-institutions that provide formal education and certifications are needed to create a skilled group of individuals required to grow P2P lending platforms and the entire Fintech industry.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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