In a review of the Master Direction for Non-Banking Financial Company – Peer to Peer (P2P) Lending Platform, the Reserve Bank of India (RBI) has issued tougher norms for NBFC-P2P platform to enhance transparency and compliance. As per the fresh directive fund transfer between the participants on the Peer to Peer Lending Platform will be through escrow account mechanisms which will be operated by a bank-promoted trustee.  At least two escrow accounts, one for funds received from lenders and pending disbursal (i.e., Lenders’ escrow Account), and the other for collections from borrowers (i.e., Borrowers’ escrow Account), need be maintained.  Under this prescribed funds transfer mechanism, funds from the lenders’ bank accounts will only be transferred to the Lenders’ Escrow Account and shall only be disbursed to the specific borrower’s bank account after ensuring compliance. The borrower will transfer the amount towards repayment of loan from his bank account to the Borrowers’ Escrow Account, from where the funds shall only be transferred to the respective lender’s bank account.  Funds from ‘Lenders’ Escrow Account’ will not be used for repayment of loans and funds from ‘Borrowers’ Escrow Account’ shall not be used for disbursement of loans. All fund transfers shall be through and from bank accounts and cash transaction is strictly prohibited.  Besides, several other provisions have been made.  All the directives except one change have come into force with immediate effect. The changes have been made since some of these platforms were found to have adopted certain practices which are violative of the previous Master Directions.  “Such practices include, among others, violation of the prescribed funds transfer mechanism, promoting peer to peer lending as an investment product with features like tenure linked assured minimum returns, providing liquidity options and at times acting like deposit takers and lenders instead of being a platform,” the RBI said in a circular. “Such violations, when observed, have been dealt with bilaterally by the Reserve Bank of India for remediation,” it added.  “The Master Direction – Non-Banking Financial Company – Peer to Peer Lending Platform (Reserve Bank) Directions, 2017 stands modified accordingly,” the banking regulator said.