Regulations are like a double-edged sword
There’s a saying, “You live by the sword, you die by the sword.” For regulated business, it’s “you live by regulations and die by regulations.”
Regulations are like a double-edged sword. They can be a moat for the business, but at the same time, they can make your business model invalid overnight. Regulations are easier when explicit (SEBI) than implicit (RBI), but I guess it is because RBI has to regulate a wide variety of intermediaries.
What happened with peer-to-peer (P2P) lending is an example. The recent P2P regulations have meant that all platforms have to make wholesale changes to their business models. Platforms can’t hold money indefinitely, they can’t facilitate lending to multiple borrowers at the same time, hint at returns, etc.
All players in the space will have to go back to the drawing board.
For more, read this post.