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India’s Paytm to curtail low-value personal loans after cenbank clampdown

Photo: Paytm

On Wednesday, the digital payments company Paytm (PAYT.NS) said it will reduce the number of personal loans that are less than 50,000 rupees, which is around $600. This comes several weeks after the Central Bank of India tightened regulations on consumer lending in response to an increase in demand.

Expecting “good demand” for loans of more than 50,000 rupees, the non-bank lender said that it will broaden its portfolio of higher-ticket personal and commercial loans to include consumers with reduced risk and high creditworthiness.

As a result of the Reserve Bank of India’s recent decision to increase the amount of capital that banks and non-bank lenders are required to hold aside to cover the possibility of defaults when providing personal loans, this development has come about.

As a result of an increase in the number of delinquencies and a jump in the number of small-ticket loans, particularly those that were less than 50,000 rupees, the Reserve Bank of India (RBI), which is also India’s banking regulator, tightened its restrictions.

Paytm is becoming “ultra conservative” in this sector, according to Bhavesh Gupta, the president and chief operating officer of the business, who revealed this information during a call with analysts.

“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,” according to Gupta.

According to his estimation, this would result in a decrease of around forty to fifty percent in the number of loans that Paytm offers through its post-paid product, but it would have little effect on the increase in income.

According to the statistics provided by the firm, post-paid loans made up around 56% of the total loans for the quarter that spanned July to September.

It is estimated by Rahul Jain, a financial analyst at Dolat Capital, that the loans from Paytm that are less than 50,000 rupees constitute around 38 percent of the company’s overall loans.

“We expect a negative impact of about 15% quarter-on-quarter on the total value of loans distributed by Paytm, but the revenue impact should be much less, at around 5% QoQ,” said the executive.

Seven non-bank financing businesses (NBFCs) now work with Paytm as loan partners. Paytm is well known for its eponymous digital payment software for making payments.

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