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

Indian non-bank lenders are also looking at other options. Paytm Sources with direct knowledge of the matter said that for the loan distribution, the firm is concerned about the regulatory crisis engulfing it which has temporarily halted lending services.

On January 31, Paytm’s banking unit was hit by the central bank’s order to wind up its business due to persistent non-compliance and a day later Paytm said it would take “probably a few weeks” to resolve operational challenges. “Will not lend to .

If Paytm’s lending partners distance themselves from the company, it will be another big blow for the app. Analysts said loan disbursement fees contributed about a fifth of Paytm’s revenue in the latest quarter.

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

A senior executive at one of Paytm’s lending partners said, “We are talking to the company about the regulatory issues and until they are resolved, we want to stay away and disburse the loan. So want to explore other options.”

The executive was one of three non-bank lender sources who said options were being explored. He was not authorized to speak to the media and declined to be identified.

A Paytm spokesperson said that while new loans from lending partners had been put on hold for a few weeks, the company “would like to emphasize the fact that this is only due to operational reasons and our loan Our relationship with donor partners remains intact.”

Paytm has seven non-bank lending partners: Aditya Birla Finance, Hero Artcorp, Piramal Capital, Poonawalla Artcorp, 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 One 97 Communications, disbursed loans worth 155 billion rupees ($1.9 billion) from seven lenders in the October-December quarter, according to the company’s presentation to investors.

“Lending was expected to be a key driver of earnings in the near future and therefore accounts for the bulk of Paytm’s (market) valuation,” said Pranav Gundlapalle, senior research analyst at AllianceBernstein.

Shares of Paytm fell another 10 percent to an all-time high on Tuesday after brokerage house Macquarie said the company faces a serious risk of customer churn. The stock has halved in value since January 31.

It remains to be seen how far-reaching the financial and reputational effects of the winding-up will be. Paytm Payment Bank Will be on Paytm.

Owners of the bank’s 330 million digital wallets will not be able to increase their deposits after February 29 but will be allowed to withdraw their money. While the deadline may be extended to allow for a smooth transition of some bank-related services, the central bank has said it will not reconsider its decision to suspend business at the bank.

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

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

However, the crisis has seen many merchants refuse to accept payments through Paytm while Walmart’s Phone p And Google Pay The demand for their services has seen an increase.

© Thomson Reuters 2024

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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)