Peer-to-Peer Lending in India: How It Works, Risks & Platforms (2026)

Peer-to-peer (P2P) lending in India is an alternative lending model where individuals lend money directly to borrowers through RBI-registered online platforms.

In this guide, you’ll learn how P2P lending works in India, its risks and benefits, legal status, and the best P2P lending platforms to consider in 2026.

How Does P2P Lending Work in India?

Now, let us understand the working of the P2P model in steps from the following table:

P2P Lending vs Traditional Bank Loan

There are differences between P2P lending and traditional bank loans, like intermediaries, timeline line and other differences. Let us understand the differences in detail from the table below:

P2P Market Size and Growth in India

Let us understand the market size of P2P lending in India:

• The market is still relatively small but growing. Approximate asset size is around ₹6,500 crore before regulatory changes.
• The non-performing asset (NPA) number in P2P lending in India reportedly rose to approximately ₹1,163 crore in FY24. 

So, in short, the P2P market is gaining popularity and offering opportunities, but with caution signs.

Benefits of P2P Lending in India 2026

Why would a lender or borrower consider P2P? Let us see the benefits for both lenders, borrowers and the financial institution:

For Borrowers

• Faster loan disbursal (digital, fewer intermediaries).
• Potentially lower interest rates compared to informal lenders (though possibly higher than top-tier bank loans).
• Access to credit when banks may turn you down (especially for smaller amounts or newer borrowers).

For Lenders / Investors

• Potential for higher returns than bank savings or fixed deposits (because risk is higher).
• Diversification: You can lend small amounts to multiple borrowers via the platform.
• Simple online access.

For the Financial System

• Helps extend credit to underserved segments.
• Adds competition to traditional banking.
• Encourages fintech innovation.

In short, P2P lending can be a win-win situation for all, but only when risks are understood, which we are going to see next.

Risks of P2P Lending

The following are some of the key risk areas for P2P lending:

• Credit/default risk: Borrower may not repay. Lenders bear this risk. In India, the NPA numbers show this clearly. 
• Platform risk: The platform may not be well-managed, default on transparency or recovery.
• Liquidity risk: Once you lend, your money may be locked in for the term and you might not exit easily.
• Regulatory risk: Rules change. For example, recent Indian regulatory changes tighten limits and remove guarantees.
• Operational risk/misuse risk: Because it is a newer system, due diligence is key. There may be fewer tools/infrastructure compared to banks.
• Borrower limit: In India, P2P borrowing is capped at ₹10 lakh across platforms.
• Platforms cannot provide guarantees or credit enhancements according to newer RBI norms.

Top 10 P2P Lending Platforms in India

The following are the 10 best P2P Lending Apps in India:

Further Reading: Top RBI Approved P2P Lending Companies in India 2026

Legal and Regulatory Status in India

Yes, P2P lending is legal in India. The RBI has issued guidelines for NBFC-P2P platforms. The following are the key points:

• The platform must be licensed as NBFC-P2P.
• Caps on exposure (borrower, lender).
• Platforms cannot provide “guarantees” nor take credit risk themselves. 

Important Tip: If you are planning to use any P2P app, make sure the platform is RBI-registered.

Conclusion

P2P lending in India is a modern, fintech-driven way to borrow or lend. It offers benefits but comes with real risks. If you are a lender, you could earn more, but you must accept a higher possibility of default.

If you are a borrower, you might get access where banks say “no”, but make sure you understand costs and terms.

Frequently Asked Questions

How safe is peer-to-peer lending?

It is riskier than a bank deposit. You may earn higher returns, but you also bear the full risk of borrower default. Even if the platform is well-regulated, risks remain.

Is P2P legal in India?

Yes, P2P lending in India is legal and regulated under the NBFC-P2P framework by the RBI.

What is an example of a P2P platform?

“LenDenClub” is one example of an Indian P2P lending platform.

Can I get a P2P loan with bad credit?

Possibly, but the interest rate may be high, the terms tougher, and many platforms may reject higher-risk borrowers. Take care to check the terms.

What is the minimum credit score for a P2P loan?

There’s no universal “minimum” credit score across platforms; each platform sets its own eligibility criteria. Always check the specific platform’s requirements.

Is P2P lending high risk?

Yes, compared to traditional savings or bank deposits, P2P lending is higher risk. Risk of default, liquidity risk and platform risk all exist.

Is a bank account needed for P2P?

Yes, typically both borrowers and lenders must have bank accounts for transfers, repayment, etc. It is part of the process.

What is the limit of P2P transactions?

In India, there are caps: for example, a lender’s total across platforms might be capped, and a borrower’s exposure also capped as per the regulatory guidance of the RBI.

What are the tax Implications of P2P Lending?

Interest you earn from P2P lending is taxable under “Income from Other Sources” as per your tax slab. There’s no special TDS in many cases.

What Is Peer-to-Peer Lending Investing?

It means you, as an individual, use your funds to lend to borrowers via a P2P platform, aiming for interest returns. However, the risk will be yours.

Disclaimer: P2P lending involves risk. Returns are not guaranteed, and investors may lose capital. Please assess your risk profile before investing.

Author: Diwakar Kumar Singh

Diwakar Kumar Singh is a finance writer and BFSI specialist with 7+ years of experience in financial content and research. He has authored hundreds of finance articles, published multiple books internationally, and contributed to research publications. A Gold Medalist MBA from IMT, he brings a strong analytical understanding combined with clear, reader-focused communication. His work focuses on simplifying complex financial topics, including IPO analysis, unlisted shares, financial ratios, and company evaluations, providing well-researched and evidence-based insights to help readers make informed financial decisions.