Paytm dials down on low-value loans to focus on high-ticket lending

Fintech company Paytm will slow down on disbursing small ticket loans less than Rs 50,000—referred to as Postpaid loans—and focus on high-ticket lending for consumers and merchants.

“On the back of recent macro development and regulatory guidance, in consultation with lending

partners, in line with its continued focus on driving a healthy portfolio, the company has recalibrated the portfolio origination of less than Rs 50,000, which is prominently the postpaid loan product,” it said in an exchange filing.

“…it will now be a smaller part of its loan distribution business going forward,” it added. 

During a call with analysts, the company informed that it used to originate nearly 3.5-4 lakh new Postpaid users every month, which will now be brought down to 50%. 

The move will lead to a near 40%-50% drop in the volume of loans given out through the platform's post-paid product, Bhavesh Gupta, president and chief operating officer of Paytm, said.

However, the impact on margins or revenue will be minimal, the company added.

Meanwhile, for high-ticket personal and commercial loans, Paytm has partnered with one large bank and two non-bank financial companies (NBFCs).

“Given the strong portfolio performance and widespread acceptance of loan distribution, the company had started in this direction last quarter and is seeing encouraging early trends,” it added. 

During the July-September quarter, Paytm's revenue from financial services, including loans, was up 64% YoY to Rs 571 crore. It managed to disburse Rs 16,211 crore worth of loans, of which Rs 9,010 crore came from Paytm Postpaid, Rs 3,927 crore personal loans, and Rs 3,275 crore merchant loans via its partner banks and NBFC—an increase of 122% YoY. 

However, the value of personal loans disbursed came down QoQ as the company reduced shorter tenor loans (six months) on its platform, terming them as riskier. This resulted in a reduction in the value of loans, while the disbursal volumes have remained steady.

Merchant loans, which are given to MSMEs as business loans, will continue to be a focus for Paytm, which also mentioned about minimal impact of the recent regulatory norms on the same.  

“As the lending distribution business is maturing, we see newer opportunities of expansion to offer high-value personal and merchant loans. We will continue to focus on originating the high portfolio quality for our lending partners, along with strict adherence to risk and compliance,” a Paytm Spokesperson said. 

The development comes as the Reserve Bank of India (RBI) tightened norms for personal loans and credit cards in the form of higher capital requirements for banks and NBFCs by increasing the risk weightages by 25 percentage points.