The Peer to Peer or P2P lending market has doubled in China. Though it might be at a nascent stage in India, according to co-founder of P2P lending platform i2i Funding Raghavendra Pratap Singh, it has a lot of potential. In a chat with The Tech Panda, Singh explained the intricate process and i2i Funding’s plans for the future.
I2i Funding had started with loan amounts of INR 10-15 lakhs per month, and now are doing INR 1.5 crore per month. Currently, they have around 50,000 registrations for borrowers and around 5,000 for investors. They add around 400-500 new investors per month. So far, the company has disbursed over 900 loans of over INR 13 crores.
“This might seem small in comparison to banks and other institutions, considering a single branch gives personal loans to the effect of INR 3-4 crores every month. Still, compared to where we started, the growth is fast,” Singh says.
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The i2i Funding Process
Although the P2P lending process varies from place to place, in India, RBI regulations try to keep it even for every place. The process involves a borrower on one side and a lender on the other. Explaining in detail, Singh laid out the process of i2i Funding. To avail a loan on i2i Funding, a person in need of an ‘unsecured personal loan’ can register as a borrower on the website. For the ignorant, ‘unsecured loans’ are loans approved without the need for collateral.
Borrowers fill up a simple form with personal and bank details and upload the document along with their PAN card, Aadhaar card, any other address proof, bank statement of last three months, and salary slip. Once the borrower has completed the online profile, it goes to i2i Funding managers, who evaluate the profile on more than 100 parameters, after which the profile either gets accepted or rejected.
In most cases, rejection happens automatically in their in-house developed system, without having to spend time on analysing each case. Once the profile is accepted, the i2i Funding team approves the interest rate and the loan amount. They also assign a risk category to each case. Along with other profile details and with their recommendation, the profile is made live on the website in the active borrower list.
On the other side are investors who want to lend money, and it is easier for them to register. They register on the website, provide PAN card, Aadhaar card, and bank account details, and they are ready. Now, they can see the profile of borrowers and can accordingly lend them money. There can be multiple lenders lending to a single borrower. The minimum lending amount is INR 5,000, while the maximum is INR 50,000, a limit set by RBI.
So for example, for a loan of INR 2 lakh, there could be 10-20 lenders lending. Once 100% funding is complete, documentation and verification is done, the lender will transfer the money to i2i Funding’s escrow account, through which the money will be transferred to the borrower. From the next month onwards, in accordance with the NACH mandate (National Automated Clearing House), which the borrower has signed, i2i Funding starts deducting EMI directly from the borrower’s account. The amount first goes to their repayment account, from where, it is transferred back to the lender’s account.
The interest is entirely given to the lender, while i2i charges processing fees, 1% of investment from the lender and 3-6% from the borrower on the loan amount, depending upon the risk category. So when disbursing the money to the borrower, i2i Funding deduct their processing fee.
Securing the Investor
To ensure security of their investors’ money, i2ifunding goes beyond CIBIL (Credit Information Bureau (India) Limited) and assesses profiles based on 100+ parameters using their proprietary and automated credit score model.
“A person who wants to borrow via the P2P model is mostly looking for an unsecured loan. At the same time, we cannot compromise with the credit quality, because good quality will ensure that investors will make money. That is the core part of our business,” explains Singh.
For credit evaluation of each borrower, i2i Funding has a fully automated system. As soon as the borrower uploads details, they ask the borrower to download their mobile app as well to process data through alternate modes. With the person’s consent, they take out data from the mobile to check its correlation with the details uploaded by the borrower. All data is divided into ‘ability to pay’, determined using salary, bank account statement, etc. and ‘intent to pay’, determined using CIBIL score, media profile, etc. The data is then put into a model, and only if approved, the process moves forward.
The story behind i2i Funding
Singh, a former merchant marine, left life at sea and went for an MBA from IIM Calcutta and then spent four years working in several corporate companies. There, he noticed that people often took loans from colleagues. They found P2P lending a good option for a business. It had already proven its worth in markets like China, where it has become very successful. In India too, it was practiced but not on a formal basis.
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So, along with his friends, Co-founder, Vaibhav Kumar Pandey and Neha Aggarwal, he did thorough research on this concept for a year or so, starting in October 2014. A year later, in October 2015, they launched their product.
“At the time, there were only two or three firms, and very few people knew about P2P lending. Regulations were also not clear. It was a grey area, but it had a lot of potential. It can help a lot of people get loans and offers a lot of options for retail investors for investment. So we knew that the idea was good. It will help both borrowers as well as investors in the long term,” Singh says.
When i2i Funding started, there were only two to three players in the Indian market, now close to fifteen serious players have applied for RBI licenses, including Faircent, Lendbox, i-lend, and LenDenClub. I2i Funding is the number two player in this market, second only to Faircent.
Currently, i2i Funding is based out of Noida, with sales offices in Bengaluru and Mumbai. The company has raised funding twice, once in May 2015, and once last year in December from individual investors to a total of INR 6.75 crore. Many Chinese investors are also showing interest. The company is also developing a P2P app for a more user-friendly approach.
