Paytm will reduce low-cost personal loans following a clampdown by RBI

7 Dec 2023 , 11:55 AM

Fewer sub-50,000-rupee personal loans would be granted by India’s Paytm, the digital payments company announced on Wednesday. This comes weeks after the central bank tightened regulations on consumer lending in response to a spike in demand.

Expecting ‘good demand’ for loans of more than 50,000 rupees, the non-bank lender announced that it will broaden its portfolio of higher-ticket personal and commercial loans to lower-risk and highly credit-worthy consumers.

This follows a recent increase in the capital requirements for banks and non-bank lenders to cover potential defaults when granting personal loans by the Reserve Bank of India.

India’s banking regulator, the RBI, strengthened its regulations in response to a spike in small-ticket loans, especially those under 50,000 rupees, and a rise in delinquencies.

In a call with investors, Paytm’s president and COO, Bhavesh Gupta, stated that the business is becoming ‘ultra conservative’ in this area.

‘On the back of recent macro development and regulatory guidance, in consultation with our lending partners, we have decided to reduce less than 50,000 (rupees) loan distribution,’ Gupta stated.

He predicted that this would have little effect on revenue growth but would result in a near 40%–50% decrease in the number of loans Paytm issues through its post-paid offering.

According to Paytm, post-paid loans made up roughly 56% of all loans during the July–September quarter.

In example, loans under 50,000 rupees make up roughly 38% of all loans on Paytm, according to financial expert Rahul Jain of Dolat Capital who talked to Reuters.

As of right now, seven non-bank finance companies (NBFCs) are lending partners of Paytm, which is most recognised for its namesake digital payments app.

It stated that it intends to bring on two NBFC partners and one banks.

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