Paytm To Step Away From New Loans In Coming Weeks

Paytm, the country's largest fintech platform, will refrain from doling out new loans in the coming weeks as it looks to resolve operational issues, according to Bhavesh Gupta, president and chief operating officer of the payments platform.

"There could be a temporary impact on lending business," Madhur Deora, executive director, president and group chief financial officer, said in a conference call.

On Jan. 31, the Reserve Bank of India restricted Paytm Payments Bank from undertaking any fresh deposit or credit transactions in any customer accounts after Feb. 29.

No other banking services, apart from withdrawals or utilisation of balances, are allowed after this date.

The regulator cited persistent non-compliance and supervisory concerns for the restriction. In 2022, the RBI put a halt on the payments bank's onboarding of new customers.

In the December quarter, Paytm's disbursed loans rose 56% year-on-year to Rs 15,535 crore through the company's three loan distribution offerings—merchant loans, personal loans, and postpaid loans.

The value of personal loans rose 52% year-on-year to Rs 4,460 crore in Q3 FY24.

The impact is additional as Paytm, in December, had rejigged its lending portfolio towards merchant loans and high-ticket personal loans. This was following the company exiting its buy-now-pay-later lending segment. Banks and financial institutions have turned cautious about fintech partnerships since the RBI raised risk weightages on unsecured credit in November.

Paytm will accelerate its diversification plans and completely move to other bank partners, it said in an exchange filing. The company has been working with other banks since March 2022.

"Going forward, OCL will be working only with other banks and not with Paytm Payments Bank Ltd.," the filing said. "The next phase of OCL’s journey is to continue to expand its payments and financial services business, only in partnerships with other banks."

Partnering with other banks would include changing the virtual payment address of QR to multiple sponsored banks, Gupta said. "We will conclude one or two banks or a large bank for this," he said.

The platform, operated by One97 Communications Ltd., is committed to making sure customers of both Paytm and Paytm Payments Bank have alternatives, Gupta said in the conference call.

"If wallet volumes go down, we would spend certain amounts on promoting products to merchants," Deora said. Paytm expects its annual operational profit to decline by Rs 300–500 crore due to these curbs.

Gupta expects "full normalcy" to come back to Paytm's operations by early March, if not earlier.

The RBI's restrictions also include the termination of nodal accounts at One97 Communications and Paytm Payments Services at the earliest and not later than Feb. 29.

"To move these nodal accounts, we already have proposals from multiple banks. We are evaluating options for where to move. We do have time till month-end but we will do it earlier," Gupta said.