The swift mobilization of funds is required for the development of an economy. The aim of this research is to study the impact of crowd funding on formal financial system and explore the pragmatic approach of P2P lending (Crowd funding). As financial system is becoming complex during last decade with regard to small size advances to fulfil the financial needs of individuals for short term. The concept of P2P lending has merged one of the important sources of fund requirement for next generation customers. P2P platform is giving tough competition to micro & small finance institutions along with various scheduled commercial banks.