Paytm To 'Scale Down' Loans Under Rs 50,000

Paytm will bring down the level of unsecured loans under Rs 50,000 in a calibrated manner, the firm told analysts over a conference call on Wednesday.

"Postpaid loans is a portfolio which is predominantly under Rs 50,000. On the back of the macro developments and regulatory guidance which is there, we have decided to—in a caliberated manner—keep scaling the Rs 50,000 portfolio, especially the Postpaid loan, down," Bhavesh Gupta, president and chief operating officer of Paytm, told analysts.

According to Gupta, while Postpaid loans will continue to be available, it will be assigned to a cohort of customers where Paytm believes it can cross-sell higher-ticket products.

"We will continue to do Postpaid; it may not be the same growth level we were doing earlier. It will be significantly lower," Gupta said.

"The high ticket is something that we are expanding our portfolio to... was something we would have done, let's say, next year. We are preponing it given the macro and overall regulatory guidance," he said.

According to a presentation the company released to exchanges on Wednesday, Postpaid loans accounted for 55% of the total loans distributed as of Sept. 30.

At the end of the second quarter, the total value of loans disbursed by Paytm stood at Rs 16,211 crore, up 9% sequentially.

As of Nov. 30, 70–73% of Postpaid loans were under the Rs 50,000 mark. Under Paytm's personal loan product, such low-ticket loans accounted for 3–5%. They contributed 4–6% of the merchant loans that the company extends.

Paytm's Postpaid loans include consumer credit, provided to customers as a 'buy now, pay later' product. Customers could avail short-term loans up to Rs 60,000 under this product, where they could purchase products and services across 1.5 crore merchants.

The company has held discussions with its Postpaid lending partners, including Aditya Birla Finance and SMFG India Credit (formerly Fullerton India), on the future of the product. These lenders would continue to disburse and manage this product, Gupta said.

"We had a discussion with them that, looking at all the regulatory guidance and some bit of noise around it... it is better that we scale it down and index ourselves in offering something which is more meaningful in the current environment. As and when the environment becomes better, we can always scale it back (up)," Gupta said.

On Nov. 16, the Reserve Bank of India raised risk weights on unsecured personal loans and credit card loans by banks and non-bank finance companies. It also raised risk weights for banks that extended credit to retail NBFCs, which focused on unsecured credit. Higher risk weights would mean that the lenders would have to set aside more capital against such loans.

Bringing down Postpaid loans will lead to a "mathematical change" to the take rate. However, there would be no negative impact on the take rate, even with the risk weight increase, Gupta said.

The take rate is a share of the gross merchandise value, which Paytm recognises as its revenue. The take rate remained in the 5-6% range at the end of the second quarter, as Paytm had previously disclosed.

As Postpaid is not a high-profitability product, the change in product mix is unlikely to cause any revenue or Ebitda impact on Paytm, Gupta said.