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

BENGALURU (Reuters) -India’s Paytm will issue fewer sub-50,000-rupee (about $600) personal loans, the digital payments firm said on Wednesday, weeks after the central bank tightened rules on consumer lending after a surge in demand.

The non-bank lender said it will expand its portfolio of higher-ticket personal and commercial loans to lower-risk and high-credit-worthy customers, expecting “good demand” for loans of more than 50,000 rupees.

This comes after the Reserve Bank of India recently raised the amount of capital that banks and non-bank lenders need to set aside to cover potential defaults when giving out personal loans.

The RBI, also India’s banking regulator, tightened its rules, after a surge in such small-ticket loans, particularly of those less than 50,000 rupees, and an increase in delinquencies.

Paytm is getting “ultra conservative” in this segment, Bhavesh Gupta, the company’s president and chief operating officer, said on 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,” Gupta said.

This, he estimated, will lead to a near 40%-50% drop in the volume of loans Paytm issues through its post-paid product, but will have a minimal impact on revenue growth.

Paytm’s post-paid loans accounted for about 56% of total loans in the July-September quarter, per company data.

The sub-50,000-rupee loans, in particular, account for about 38% of Paytm’s total loans, estimated Rahul Jain, financial analyst at Dolat Capital.

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

Paytm, best known for its namesake digital payments app, currently has seven non-bank finance companies (NBFCs) as lending partners.

It said it plans to add one banking and two NBFC partners. ($1 = 83.3324 Indian rupees)

(Reporting by Indranil Sarkar, Chris Thomas Dimpal Gulwani in Bengaluru and Siddhi Nayak in Mumbai; writing by Ira Dugal; Editing by Nivedita Bhattacharjee and Savio D’Souza)