Paytm Adapts Loan Strategy Post RBI Regulations

India's leading digital payments firm, Paytm, is adjusting its lending strategy in response to recent regulatory changes by the Reserve Bank of India (RBI). The central bank implemented tighter rules on consumer lending after witnessing a surge in demand, particularly for small-ticket loans under 50,000 rupees (about $600). Paytm has announced its decision to reduce the issuance of sub-50,000-rupee personal loans, aiming to focus on higher-ticket loans for lower-risk and credit-worthy customers. This move comes as the RBI increased the capital requirements for banks and non-bank lenders to cover potential defaults on personal loans.

According to Bhavesh Gupta, Paytm's President and Chief Operating Officer, the company is taking an "ultra-conservative" approach in response to recent macro developments and regulatory guidance. Paytm plans to enhance its portfolio by catering to the demand for loans exceeding 50,000 rupees. Although this shift is expected to result in a substantial decrease of around 40%-50% in the volume of loans issued through its post-paid product, Gupta anticipates minimal impact on revenue growth.

As per the company's data for the July-September quarter, Paytm's post-paid loans constituted approximately 56% of total loans. Analysts estimate that loans below 50,000 rupees represent about 38% of Paytm's total loan portfolio. Rahul Jain, a financial analyst at Dolat Capital, suggests that this adjustment may lead to a negative impact of about 15% quarter-on-quarter on the total value of loans distributed by Paytm. However, the anticipated revenue impact is likely to be much less, around 5% QoQ.

Paytm, renowned for its digital payments app, currently collaborates with seven non-bank finance companies (NBFCs) as lending partners. In response to the changing landscape, the company plans to onboard one banking partner and two additional NBFC partners. This strategic shift aligns with Paytm's commitment to compliance and responsible lending practices in the evolving regulatory environment.

As the digital finance sector undergoes adjustments to adhere to regulatory frameworks, Paytm's move showcases its proactive approach to aligning with the RBI's directives and ensuring sustainable growth in the competitive landscape.