All Financial Transactions on Faircent Conducted through Escrow Account: Rajat Gandhi, Faircent
Faircent is India's first peer-to-peer (P2P) lending platform to receive a Certificate of Registration (CoR) as an NBFC-P2P from the Reserve Bank of India (RBI).
Faircent.com provides a virtual marketplace where borrowers and lenders can interact directly, without having to go through the traditional financial intermediaries like banks, who have become such behemoths in today’s time that they dictate all terms and conditions for both borrowers and lenders.
Excerpts from an interview with Rajat Gandhi, founder and CEO, Faircent.
BW CIO: Some finance regulators have not given a legal definition of P2P lending. How are you doing this?
Rajat Gandhi: The RBI, in its regulatory guidelines announced in October 2017, clearly seek to define the regulatory framework within which NBFC-P2P can operate.
They cover permitted activity, prudential regulations on capital, governance, fund transfer mechanism, data security, business continuity plan (BCP), regulatory reporting and customer interface apart from other operative parameters.
Faircent.com was the first platform in India to meet all guidelines prescribed by RBI and receive the NBFC-P2P certification in May, this year. This is a validation of the business model that we have painstakingly built over the last five years.
There is no risk-exposure on our balance sheets, we have never lent from our books and as a practice, stayed away from guaranteed schemes such as principal protection fund. We implemented the escrow account system, even before the RBI mandated is as compulsory.
All financial transactions on our platform are undertaken through an escrow account under the trusteeship of ITSL (an IDBI Trusteeship Services Ltd). Borrowers are evaluated by our fully-automated credit evaluation mechanism across more than 400 data points to understand their ability, stability and intent to repay before they are listed on the platform.
Physical verification is undertaken, both, at the home and the office. All the data pertaining to borrowers is transparently mentioned on their profile to enable the lenders to take informed decisions. Statistical and research analysis is shared periodically. We take pride in following the best practices and processes to ensure the best value for all our stake-holders.
BW CIO: Who are these lenders and how do you ensure that the money itself that they lend is legitimate?
Rajat Gandhi: Lenders on Faircent.com have to fulfill a certain set of criteria such as, they must be a resident of India, be at least 18 years of age, have a valid bank account in India, a valid PAN card, and they should also agree to abide by the company’s policies.
As far as individual lenders on the platform are concerned, they are high net-worth, either salaried individuals, self-employed professionals, senior citizens, or even traditional money lenders, looking to diversify their investment portfolio with a unique asset class like P2P lending.
As a policy, all financial transactions on the platform are conducted through the Escrow account, which means that lenders must first deposit money into this virtual account through online transfers only, which ensures that the funds are received from a legitimate source and are recorded so that they can be verified in the future.
For institutional lenders, only finance companies listed with the RBI or companies formed under the Indian Companies Act are eligible to apply. No cash transactions are possible on the platform.
BW CIO: What has been the all-India success rate for Faircent so far?
Rajat Gandhi: As a pioneer in the domain, Faircent.com has established P2P lending as a unique alternative investment asset class in India. Through its tech-led approach, it has not only helped in enabling more seamless access to credit for the Indian borrowers, but has also presented a high-potential avenue of wealth creation to investors across the country.
In May 2018, Faircent.com became the first P2P lending platform in the country to be identified as an NBFC-P2P and receive its Certificate of Registration from the Reserve Bank of India (RBI). The differentiation that it delivers has been driving Faircent.com’s impressive growth since the launch of its operations; the platform currently has more than 40,000 registered lenders and 3.5 lakh registered borrowers, and has facilitated over 6,000 loans cumulatively till date.
Faircent.com has received a total of $7 million as capital investment till date. Several prominent names from the VC and financial communities have invested in the company, including JM Financial, 3one4 Capital, M&S Partners Pte Ltd, Aarin Capital, Incofin Investment Management, Muthoot Fincorp, EIP, Das Capital, Starharbor Asia Pte Ltd, and CUS.
