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Peer to Peer (P2P) Lending Business in India

Have you ever lent money to friends and relatives? Then you know how hard it is to recover the money from people you know personally. How about lending some money to some others and making some extra money?

If you have the capacity and the will to lend, peer-to-peer (P2P) lending can just be the right place. P2P is an online marketplace where lenders get access to people who need to borrow. The borrowers on P2P platforms are listed after a lot of deliberations and verifications. And the interest rates are calculated by an automated credit appraisal system that uses the personal and financial information provided by borrowers. Anyone above 18 years of age holding a valid bank account and PAN in India can become a lender.

P2P lending or peer-to-peer lending is a classification of microfinance which is a form of crowd-funding used for raising loans that is to be paid back with interest. 

It is an online platform where matches are made between lenders and borrowers to provide an unsecured loan. The borrower can either be an individual or any legal person seeking a loan.

The rate of interest is either set by the platform or is mutually decided by the borrower and the lender.

Document Required

Here’s a step-by-step guide to make your first P2P investment:

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Step 1: The first thing that you need to do after you have selected the P2P platform is to register on it. You will be asked to enter basic information to create a login ID and provide self-attested copies of PAN and address proof for verification.


Step 2: When you sign up, you have to create an investor account to start a financial transaction. You may be asked to pay a one-time non-refundable registration fee of Rs 500-1,000 at the time of signing up.


Step 3: Once the verification is complete, your investor profile will be listed on the P2P platform along with your investment preference. Offers are accepted on a first-come, first-served basis.


Step 4: You can start investing by sending proposals to borrowers. The rate of interest is mutually decided by the investor and borrower during the listing period. Loan listings are visible on the lender’s dashboard along with relevant financial, credit, and personal details of each borrower. An investor can commit to lend single or multiple borrowers.

A lender can fund up to 20 percent of a borrower’s total loan requirement. As per the existing norms, the total amount invested by a lender cannot exceed Rs 10 lakh at any given time across all P2P-NBFCs platforms, with a maximum of Rs 50,000 per borrower.

Step 5: Once a commitment has been made, the investor will have access to further documents as uploaded by the borrower. Upon successful verification, the borrowers and the investors will sign a loan agreement which is a legally binding document enforceable in the court of law. Some of the websites allow you to view borrower documents by paying a document viewing fee. This fee is valid for a limited time.

Step 6: Loan disbursal begins after the official loan agreement has been signed and the borrower has provided the required number of Post-Dated Cheques towards security and repayment of the first EMI.

Step 7: Both disbursals and loan repayment is done through an escrow account. The lender has to pre-fund his Escrow account with the amount he wishes to invest. As per RBI guidelines, a P2P platform has to have at least two escrow accounts for fund transfer, to be operated by a trustee promoted by the bank which maintains these accounts.

Step 8: After the loan is disbursed, the lender will receive EMIs on or before the 15th of every month. If a borrower fails to pay an EMI within a stipulated time, a penalty is levied on the borrower which is payable directly to the lender.

You can utilize the EMI payments according to your needs. You have an option to reinvest the money to earn a better return.

  • Any address proof for directors as well as shareholders (like: Driving License, Passport, or Voter ID)

  • Copy of latest electricity bill, telephone bill, or mobile bill for directors.

  • Occupation of directors as well as shareholders.

  • E-Mail IDs of all directors and shareholders.

  • Phone Numbers of all directors and shareholders.

  • Photographs of all directors and shareholders.

  • Duplicate of rent accord along with No Objection Certificate (NOC) from the landlord (if in case the office premise is rented).

  • Affidavits for non- acceptance.

  • If in case there is a change in the original subscribers of MOA, then the No Objection Certificate (NOC) is also required,

  • Subscriber Sheets of MoA and the AoA.

  • PAN Card of the company.

  • Proof of Nationality which is needed if the subscriber is a foreign national.


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Co-Fonder and Director

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