The Reserve Bank of India (RBI) wants to allow peer - to - peer lending, a popular concept in developed countries where the borrower and the credit - seeker are matched on a platform for negotiating unsecured loans.
Peer - to - peer lending is a form of crowd - funding where an online platform matches the lenders with the borrowers for unsecured loans.
Both the borrower and the lender can either be an individual or corporate entity.
The platform gets a fee for its services from both parties.
"The Reserve Bank of India has today (Thursday) placed on its website the consultation paper on peer - to - peer lending, for seeking comments, views from all interested parties and general public, " the central bank said in a statement on Thursday, calling for responses by May 31.
"There are many variants of peer - to - peer lending platforms in terms of the nature and extent of services provided by them.
Global regulatory practices also vary.
At present, there is no clear regulatory framework in India governing the functioning of the peer - to - peer lending platforms. "
The paper outlines the pros and cons of regulating the sector and proposes a suitable framework for regulating this activity, which includes minimum capital, permitted activity, governance requirements, fair practices code for customer dealing and data security.
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