Parking Emergency Fund In P2P Platform

Everybody knows that emergency fund is absolutely necessary. Nobody likes to have unforeseen expenditure but we can never know when bad luck knocks at our door.could be in the form of medical emergency, a layoff, car repair,  a close friend’s requirement

How do we park our money in emergency fund and what impact it can have in the long run !

Primary requirement of an emergency fund is liquidity i.e. money should be at our disposal. Secondary requirement is returns, higher the better.

I will do a comparative analysis of a person who uses a saving bank for parking money and other who uses P2P .

Lets say Mr X earns 1lakh per month and keeps an emergency fund of 4lakh in the saving account.basically out of the 5 lakh .1 Lakh is for immediate requirement like some medical issue etc( technically everybody should have a medical insurance also). The rest 4 lakh is for  a scenario where if he loses a job he can still pay for bills,rent and emi etc.

Saving bank Performance

In 15 years at 5% return your emergency account will grow to 10.4 lakh. Hardly the amount that will cover you 15 years later.


So whats the alternative :P2P lending

But how do we use P2P lending to maintain liquidity

We can split the emergency fund into 2 parts:

1 part : current month liquidity

2 part: far month liquidity


So the 5 lakh will be divided into 1+4i.e 1 for this month and 4 for later

Basically 1 month backup is for immediate needs and later for other than that.

We put the 1 in saving bank and 4 in P2P platform.

The cashflow of the 4 lakh will look like.I have considered following assumption

6 months loans,20% interest rate 4 lakh capital

So every month we get back close to 71000.Now if things are going great we reinvest this ,otherwise we can draw it and get 71000 in 1 day. We have visibility of next few months so we can start or stop reinvesting accordingly.

Lets say that we do this for 15 years and  luckily we dint need to use it How much would we have made doing this:

@ 15% cagr (considering some defaults) : 40.7 lakh

@20% cagr  :77 Lakh

Isnt it wonderful that our emergency fund ends up as our best investment!

LendenClub (use code LDC11989 to get discount)

RupeeCircle use code PIND145

For I2I with portfolio analysis use


Mail me To know how to create a robust portfolio.



P2P Portfolio Analytics (November)

Hi everybody,

From this month I will publish my monthly P2P returns and performance.Also I will show how to perform analysis to make the most out of your investment.

Portfolio Synopsis: I have been  investing in 3 platforms actively for the past 11 months. I will evaluate all the 3 platforms and how I manage risk associated with this investment class.

Portfolio Composition


As we can Portofolio allocation is maximum in I2I and lowest in Faircent .Now I will take you through steps in  managing Portfolio like an investment firm. Our objective is to make consistent returns while minimising risk.

  • Calculating Portfolio Performance:

Most P2P lending provide expected income in their dashboard. This does not provide a clear picture of the portfolio performance. There are 2 methods to calculate our portfolio performance

Net Annualized Return(NAR) : In this method we calculate the monthly interest computed on the available principal that month and then annualize the returns.In other words we calculate principal weighted annualized Interest.

XIRR: In this method we consider in all the cashflows debited or credited in the account and thus come up with an interest rate to achieve the closing balance. Advantage of this method is that it factors in the cash lying in account which is not deployed and thus loss due to cash drag.

Used NAR method (will compare with XIRR in future).

  • Non Performing Assets: Biggest risk in P2P lending is non performing assets.Its hard to predict npa beforehand and most P2P report NPA post 180 days delay which might give an investor an inflated ROI figure because of under reporting. How to ideally factor  in NPA? There are 2 ways:
  1. Providing loss factor for delinquent loan depending upon how much they are delayed. Eg: 25% loss factor for 60 days past due and 50% for 90 DPD.
  2. Taking a more conservative figure of NPA i.e having a smaller cutoff delay date for considering a loan NPA. Eg take all loan 60 days past due  as NPA .

I have used the second method for NPA.

Now with these methods I have done my portfolio analysis .I will post individual as well as portfolio level performance.

LendenClub (use code LDC11989 to get discount) :

 Provision I have kept as  the amount of NPA I can tolerate to get 10% Return on my investment, below that investment is futile.

Future EMI

I2I Funding:

 I2I has more provision than Lenden simply because  I2I has showed lower NPA for a longer vintage and I have collected more interest in that period thus I can afford to lose more in the next few months

Future EMI:



Faircent has been a disappointment with barely managing 4.9%!Almost equivalent of a saving account L

I should have started this portfolio analysis earlier to prevent this mishap

Future EMI


Now lets see Total portfolio Performance and Strategy



Returns look fine considering I have been Conservative in my calculation. Now lets see the future EMI



As  I had invested more in short term I have lot of inflows in the near future and thus need to balance out my lending


Strategy Going Forward:


  • Move all Faircent EMI to Lendenclub(better risk adjusted Return)
  • Start Investing in RupeeCircle(use code PIND145 while registering to get portfolio analysis reports)
  • Increase investment in I2I  (use referral to get portfolio analysis   )
  • Need to reduce EMI outflow in near month .For this I will go long dated loans in Faircent,medium dated in Rupee circle and short dated in Lenden.
  • Will Run Portfolio analysis next month again and compare results

People who wish to construct a quantitative P2P portfolio can mail me.