It's been more than a month since the Reserve Bank of India's (RBI) crackdown on peer-to-peer (P2P) lending. The industry, which appeared to have halted operations overnight, now seems to be interpreting the latest circular. Meanwhile, cracks are starting to show in the Lendbox-Mobikwik partnership.

Starting this month, MobiKwik’s Xtra Flexi investors have been facing issues with withdrawals. While the general belief in the industry is that the correct interpretation of the RBI circular does not allow for anytime withdrawals, sources suggest that many P2P NBFCs have begun "honouring withdrawal commitments for some of their investors."

At first glance, it may seem that Lendbox and Mobikwik—appearing to be the more compliant players—are right in restricting withdrawals, but the reality is more complex.

The issue seems to have been triggered by changes in the withdrawal policy by Lendbox, Mobikwik’s lending partner. A sudden change without prior notice has left many investors stranded, unable to access their funds, sparking confusion and frustration.

The turmoil began in early September when investors of Mobikwik’s Xtra Flexi product—a P2P lending service offering returns of up to 14%—found that their withdrawal requests were suddenly being denied. This happened without any official announcement or communication from Mobikwik or its P2P lending partner, Lendbox, about changes to their policies.

Investors, some of whom had invested large sums, were caught off guard when attempts to withdraw money were met with error messages and delayed responses from customer support.

On September 3, 2024, the situation worsened when some investors reported that their funds had been "reinvested into new loans without their knowledge or consent." Lendbox and Mobikwik had consolidated all existing schemes into a single "Loan ID" and reinvested the capital without informing investors, raising concerns about compliance with RBI guidelines.

Investors expressed their frustration, highlighting the lack of prior notice. One investor, who had invested Rs 50 lakh through the Xtra Flexi scheme, explained how they had successfully withdrawn Rs 11,000 in interest income on August 31 but were later unable to withdraw Rs 38 lakh to make a property payment just days later.

“When I raised a support ticket with Mobikwik, I was told the issue was due to maintenance,” one of the many investors told The Head and Tale. “However, further investigation revealed that withdrawals had been halted indefinitely,” he added.

Another investor, who had invested Rs 30 lakh into the platform, expressed frustration over the lack of communication. He had invested Rs 10 lakh into the Lendbox Xtra Flexi product through the Mobikwik platform from three separate accounts in September 2023 and was expecting daily interest interest.

In fact, many investors turned to social media, particularly on the platform X (formerly Twitter), to voice their grievances. Several users reported similar experiences, claiming they had been unaware that their money was being reinvested.

RBI’s guidelines for P2P lending platforms state that investors must be informed about their investments and any changes, particularly regarding borrower mapping and reinvestment decisions.

However, the actions of Mobikwik and Lendbox appear to have violated these rules. The RBI’s P2P lending regulations mandates that any reinvestment must have the consent of the investor—something that didn’t happen in this case.

The amended guideline clearly states: “No loan shall be disbursed unless the lenders and the borrowers have been matched/mapped as per the board approved policy, the individual lender have approved the individual recipient of the loan and all concerned participants have signed the loan contract.”

Secondly, on borrower mapping data, here’s what the circular reads: “To the lender, an NBFC-P2P shall be required to disclose details about the borrower including personal identity with his/ her consent (which should be kept on record), required amount, interest rate sought and credit score as arrived by the NBFC-P2P.”

It has been over two weeks since the ‘reinvestment’ of investors' funds occurred, but there is still no update on the crucial borrower mapping data on the investors' app.

P2P lenders are required to provide “full transparency to investors (or lenders, in regulatory parlance),” allowing them to see exactly who the borrowers are, several investors feel. The lack of borrower mapping has left investors in the dark, unable to assess the status of their loans or understand where their money has gone.

The absence of this data has caused widespread concern among investors, many of whom fear that their funds may be at greater risk without clear borrower information.

Before we delve into how MobiKwik and Lendbox have begun shifting blame onto each other, The Head and Tale has learned that Lendbox recently received a show-cause notice from the RBI. “Lendbox has also received a show-cause notice from the regulator over non-compliance,” a source, who wished to remain anonymous, said. However, it is unclear whether any monetary penalty was imposed.

Last month, two P2P lenders, LenDen Club and LiquiLoans, were fined Rs 1.99 crore and Rs 1.92 crore, respectively, for violations of the RBI's guidelines concerning P2P lending platforms and digital lending practices.

As tensions rise over the withdrawal freeze and lack of transparency, both Mobikwik and Lendbox have shifted the blame onto each other. While Mobikwik distances itself from the situation, asserting that it is merely a channel partner for Lendbox, investors are left in a state of confusion and frustration.

In a statement, Mobikwik emphasized that the operational changes, including the halt on anytime withdrawals, stem from decisions made by Lendbox to comply with updated RBI regulations. A Mobikwik spokesperson explained, “MobiKwik Xtra is a P2P lending product powered by our NBFC-P2P partner, Lendbox. Due to the amendment of the P2P NBFC master directions issued by the Reserve Bank of India on August 16, 2024, Lendbox has restructured this product which has resulted in the stoppage of anytime withdrawal among other changes. Note that MobiKwik only acts as a channel partner for Lendbox.”

Mobikwik claims it has informed its customers about these changes through various channels, including FAQs and customer support. “Customers will receive principal and interest as repayments are made by the mapped borrowers. This amount will be available for withdrawal on the 12th of every month,” the spokesperson added, pointing out that customers should expect to see their repayment schedules on the MobiKwik app shortly.

However, Lendbox has remained relatively quiet on the matter. The company provided only a brief statement, indicating that the changes were necessary to align with RBI’s new directives.

While Lendbox did not respond to a detailed query from The Head and Tale, correspondence between Lendbox and investors nonetheless reveals the deepening confusion.

In one instance, Lendbox advised an investor to download the borrower’s list from Mobikwik’s app, stating, “If in case, it is not available there, kindly ask Mobikwik for the same.”

This has led to a troubling situation where both entities—Mobikwik and Lendbox—appear to be shifting responsibility. Mobikwik asserts that key issues like borrower mapping and reinvestment are Lendbox’s responsibility, while Lendbox insists that Mobikwik should handle the customer-facing aspects of the investment.

While MobiKwik also did not respond to a detailed query, an official from Mobikwik, who did not wish to be quoted, from The Head and Tale, “Borrower mapping, reinvestment—these are all Lendbox’s responsibilities. Mobikwik cannot do anything. If we do anytime withdrawal, we are non-compliant. If we can’t get money back from the borrowers, we can’t return the money.”

The larger question remains: if anytime withdrawals are deemed non-compliant, then how is reinvesting investors' money or consolidating their funds into other schemes without consent allowed?

Denying any involvement in these reinvestments, the MobiKwik official stated that it is solely Lendbox’s decision. “Whenever the borrower returns the money, that money will be returned to the investors.”

A deeper rift between the two companies has surfaced as investors question the fairness of the partnership.

We have gathered that Lendbox has allowed withdrawals for investors who invested money through its platform, Per Annum, directly—something that has infuriated Mobikwik's investors.

“I invested through Per Annum and just two days ago, I managed to withdraw my money (under Rs 5 lakh),” a Per Annum investor informed.

When asked about this discrepancy, a Mobikwik official remarked, “Whatever is happening in the backend, it is all Lendbox’s responsibility. If they are giving to one person and not to Mobikwik’s investors, then they are not compliant.”

In response to another investor’s query, Lendbox hinted at the complications posed by the RBI’s lack of clear guidance regarding older investments. “While we understand your concern, we would like to submit that in light of no clear instructions from the RBI on allowing grandfathering of deposits made prior to the amended circular date (16th August), we are unable to offer the features previously offered as part of your P2P investment,” Lendbox said.

It is also worth noting that if the amount was reinvested in the first week of September, how, within a few days, a standard 10% of the total invested amount (principal + interest) was paid out to all investors. Did the borrowers pay their EMIs exactly at that time?

That said, several industry sources indicated that platforms like Liquiloans, Cred Mint, BharatPe 12% Club, and LenDenClub, among others, are still allowing withdrawals. The question, however, remains: How are they allowing withdrawals post the RBI’s circular? Are they paying the money from their own pockets? Is it the FLDG amount?

When one investor confronted Lendbox about how other platforms are allowing withdrawals, the Lendbox team clarified that they couldn’t comment on what others are doing, and explained that the investor's money had been lent to multiple borrowers and was not readily available for withdrawal. “Your money is lent to multiple borrowers for their respective durations; we don’t have your money,” the Lendbox team reportedly told the investor.

“They also mentioned that any solution would require regulatory intervention, like the introduction of a temporary secondary market, and stressed that repayments would be made by borrowers, not Lendbox,” the investor said.

Adding to the complexity, Lendbox criticized Mobikwik’s handling of the situation, particularly in how it communicated with customers. “Lendbox said it would raise the issue with higher authorities. And, it further emphasized that they have 20+ investing and borrowing sourcing partners tied up with them, and Mobikwik is just one of these partners.”

As the blame-game intensifies, investors are left caught between two companies, both pointing fingers at each other, while their money remains tied up.