Paytm crisis: Non-bank lenders asked to explore options for loan distribution

Sources with direct knowledge of the matter said Indian non-bank lenders are considering options other than Paytm for loan disbursement as they are concerned about the regulatory crisis engulfing the company, which has led to the temporary closure of loan services. Has happened.

On January 31, Paytm’s banking arm was hit by the central bank’s order to shut down its business due to persistent non-compliance with regulations and a day later Paytm said it would take “probably a few weeks” to resolve the operational challenges. Will not release loan till. ,

If Paytm’s lending partners walk away from the company, it will be another big blow to the app. Analysts have said loan delivery fees contributed about one-fifth of Paytm’s revenue in the latest quarter.

While non-bank lenders have not terminated their contracts with Paytm, sources said they have no visibility on when they will be able to resume lending through the Paytm app.

A senior official at one of Paytm’s lending partners said, “We are talking to the company about the regulatory issues and until they are resolved, we intend to stay away and explore other options for loan disbursement.” Want.”

The executive was one of three sources at non-bank lenders who said options were being explored. They were not authorized to speak to the media and declined to identify themselves.

A Paytm spokesperson said that although new lending from lending partners has been put on hold for a few weeks, the company “would like to emphasize the fact that this is purely for operational reasons and in coordination with our lending partners.” Our relationship remains intact.”

Paytm has seven non-bank lending partners: Aditya Birla Finance, Hero Fincorp, Piramal Capital, Poonawala Fincorp, Shriram Finance, SMFG India Credit and Tata Capital.

None of the non-bank lenders responded to Reuters requests for comment. Most also have partnerships with other digital payments firms.

Paytm, formally known as One97 Communications, disbursed loans worth Rs 155 billion ($1.9 billion) on behalf of seven lenders in the October-December quarter, according to the company’s presentation to investors.

“The expectation was that lending would become a key driver of earnings in the near future and hence would be a major contributor to Paytm’s (market) valuation,” said Pranav Gundlapalle, senior research analyst at AllianceBernstein.

Paytm shares fell another 10% to a new record low on Tuesday after brokerage house Macquarie said the company faced a serious risk of customer exodus. The stock’s value has halved since January 31.

It remains to be seen how wide-ranging financial and reputational impact the closure of Paytm Payments Bank will have on Paytm.

The bank’s 330 million digital wallet owners will not be able to add to their deposits after February 29, but will be allowed to withdraw their money. Although the deadline may be extended to allow smooth transition of some bank-related services, the central bank has said it will not review its decision to halt business at the bank.

Having its own payments bank allowed Paytm to process transactions at a lower cost than other digital payments firms. Paytm has said that it is working on securing new banking partners.

However, payments can still be made on the Paytm app using India’s popular Unified Payments Interface (UPI) digital payments system.

However, the crisis has led to many merchants refusing to accept payments through Paytm, while Walmart’s PhonePe and Google Pay have seen a surge in demand for their services.


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