Paytm to cut down on small-ticket loans after RBI tightens consumer lending norms, set to expand higher-ticket ones

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Bank of India tightened rules on consumer lending, Paytm will cut down on disbursing loans under ₹50,000, said the Indian digital payments firm on Wednesday. In addition to this, the bank is likely to expand to higher ticket ones. The company is planning to reduce the proportion of small-ticket loans, also called postpaid loans, from its future loan distribution business.

The move will lead to a near 40%-50% drop in the volume of loans disbursed through the platform's post-paid product, Bhavesh Gupta, President and chief operating officer of Paytm, said on a call with analysts, reported Reuters. The impact of the reduction of postpaid loans on Paytm's revenue growth would be minimal, clarified Gupta. Now, the company would focus on the expansion of 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.

"As the lending distribution business is maturing, we see newer opportunities for 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. We have seen great scale and acceptance for our loan distribution business, so we believe this expansion will further aid us to grow the business," said a Paytm spokesperson.

Weeks ago, the central bank had raised risk weightages for banks and non-bank financial companies (NBFCs) by 25 percentage points. The move was intended to tighten norms for personal loans and credit cards, to cut the rising demand for loan growth that may contribute to inflation. The move may also raise the risk of slow loan growth.