Challenges in P2P Lending Growth

The rapid expansion of peer-to-peer (P2P) lending platforms in India has led to significant challenges, particularly regarding the management of risk and default rates. Initially, these platforms offered quick, collateral-free loans, attracting a wide range of borrowers and lenders looking for better returns. However, as competition intensified, some platforms began promising assured returns and took on risk profiles similar to traditional banks, which ultimately blurred the distinction between P2P lending and deposit-taking operations. This risky behavior resulted in a striking increase in non-performing assets (NPAs), skyrocketing from approximately Rs. 14 crore in FY19 to Rs. 1,163 crore, representing an 8,200% rise in just five years, highlighting the urgent need for regulatory oversight to maintain stability in the sector.