Indian Non-bank Lenders Seek Options For Loan Disbursal Amid Paytm Crisis: Report

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Indian non-bank lenders are reportedly exploring alternative options for loan disbursal, as concerns about the regulatory challenges affecting Paytm have prompted a temporary suspension of its lending services, sources with direct knowledge of the matter told the news agency Reuters. On January 31, Paytm’s banking division, Paytm Payment Bank, was instructed by the Reserve Bank of India (RBI) to cease its operations due to continuous non-compliance with regulations. The following day, Paytm announced that it would temporarily suspend loan origination for “perhaps a couple of weeks” to address operational difficulties. 

Analysts have suggested that if Paytm’s lending partners were to disassociate from the company, it would lead to another significant blow to the app. They note that loan distribution fees accounted for nearly one-fifth of Paytm’s revenues in the most recent quarter. Although non-bank lenders have not formally ended their agreements with Paytm, reports indicated they lack clarity on when they might be able to recommence lending through the Paytm app.

“We have been speaking to the company about regulatory issues, and until those are resolved, we want to stay away and explore other options for loan disbursal,” a senior executive at one of Paytm’s lending partners told Reuters.

One of the executives from the non-bank lenders, along with two others, mentioned that they were exploring various options, according to the report.

According to a Paytm spokesperson, new lending from lending partners has been paused for a few weeks; the company “would like to stress upon the fact that it is solely due to operational reasons and our relationship with our lending partners remains intact,” as per the report. Paytm has partnerships with seven non-bank lending firms: Aditya Birla Finance, Hero Fincorp, Piramal Capital, Poonawalla Fincorp, Shriram Finance, SMFG India Credit, and Tata Capital.

Meanwhile, on Tuesday, Paytm shares plummeted an additional 10 per cent to reach new record lows, following a warning from brokerage house Macquarie regarding the company’s significant risk of losing customers. Since January 31, the stock’s value has dropped by half.

Also Read: Reliance Becomes First Indian Company To Hit Rs 20 Lakh Crore In Market Capitalisation

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