P2P lending
The pitch is hard to ignore: lend money to strangers through an app, earn 10-13% a year, all under an RBI licence.
What the platform actually is
A P2P platform is an NBFC with a specific RBI licence that forbids it from lending its own money. It is a marketplace: it lists borrowers, runs some credit checks, collects repayments, and takes a cut.
The number that matters is not the advertised one
The advertised 11-13% is the gross yield on the loans. Your return is that number minus defaults, minus platform fees, minus tax at your slab rate.
Who this actually suits
I am not against P2P lending; I am against the marketing.
The pitch is hard to ignore: lend money to strangers through an app, earn 10-13% a year, all under an RBI licence. With a bank FD paying about 6.5-7% in September 2026, that spread looks like found money. It is not. The extra 4-5% is the salary of a job you are being hired to do without being told: you are the credit department of a very small, very unsecured bank.
What the platform actually is
A P2P platform is an NBFC with a specific RBI licence that forbids it from lending its own money. It is a marketplace: it lists borrowers, runs some credit checks, collects repayments, and takes a cut. Under the RBI’s P2P Directions updated in 2025, the platform cannot guarantee your return, cannot park your money on its own books for more than a day, and must cap your total lending at Rs 50 lakh, and your exposure to any single borrower at Rs 50,000. Read those protections carefully: every one of them protects the system. None of them protects your money. If the borrower defaults, that loss is entirely, contractually, yours.
The number that matters is not the advertised one
The advertised 11-13% is the gross yield on the loans. Your return is that number minus defaults, minus platform fees, minus tax at your slab rate. The borrowers paying 14-20% on these platforms are precisely the people banks refused to lend to at 12%. Some are good credits the banks missed; the base rate of the pool is not. A diversified book of a few hundred loans might lose 3-6% to defaults in a normal year and more in a bad one, which is how an 12% gross yield becomes a 7-8% net return, in the same territory as a boring corporate bond fund, with far less liquidity and far more operational fiddling.
Who this actually suits
I am not against P2P lending; I am against the marketing. As a small satellite allocation, money you can afford to see impaired, spread across hundreds of borrowers and more than one platform, it is a legitimate income experiment for someone who enjoys reading the dashboards. It is not an FD replacement, not a place for an emergency fund, and not a “passive” 12%. The 2024-25 RBI crackdown that killed guaranteed-return products and auto-invest algorithms was the regulator saying the quiet part out loud: the guarantee was always marketing.
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Every credit product in history has paid its yield for the same reason: someone, somewhere, might not pay you back. In P2P lending, that someone is your counterparty, the risk is yours, and the app gets its fee either way. Price it like a lender, or do not play a lender’s game.