What is the NBFC-P2P T+1 Rule and How Does It Impact Your P2P Account?

The RBI’s updated regulatory guidelines for P2P lending platforms, issued on August 16, 2024, introduced the T+1 rule, which came into effect on November 15, 2024.

What is the T+1 Rule?

Similar to stock market settlements, the T+1 rule mandates that all funds on P2P platforms must be settled within one working day of the transaction date (T).

• For loan funding: Funds transferred by lenders must be disbursed into loans (credited to borrowers' bank accounts) within one working day. If not, then unallocated funds must be returned to the lender's personal bank account.

• For repayments: Repayments received from borrowers must be credited to lenders' bank accounts within one working day.

A working day refers to days when banks and escrow trustees (who process P2P transactions) are operational. For instance, if you transfer funds on a Monday and Tuesday is a bank holiday, the settlement will occur on Wednesday.

What Does This Mean for Lenders?

When Funding Loans

• Lenders must select and approve loans to fund within one working day of transferring funds.

• If this step is not completed, the funds will be returned to the lender’s personal bank account.

• To avoid missing allocation, lenders are advised to transfer funds only when the platform indicates that sufficient loans are available that match their preferences.

When Receiving Repayments

• Borrower repayments will be credited to lenders’ personal bank accounts within one working day of receipt by the repayment escrow account.

• Repayments (including principal and interest) are likely to be received as smaller credits throughout the month, as borrowers’ EMI payments occur on different dates.

Key Considerations for Lenders:

• With principal repayments, your active account value will decline over time unless funds are reinvested or topped up.

• To maintain or grow your account value and maximize potential interest earnings, you can re-deploy these repayments into new loans by selecting from available options on the platform.

This rule introduces greater transparency and ensures timely fund movements while requiring active participation from lenders to manage their accounts effectively.