Paytm, India’s leading payments and financial services distribution company, achieved 48 per cent growth year-on-year (YoY) in its loan distribution business reaching Rs 52,390 crore in FY24. This was primarily due to its intensified focus on well-established distribution-only models, which offer a larger market and attract more interest from financial institutions. Paytm had expanded from small ticket to larger ticket personal loans.
Despite a decline in loan distribution in Q4FY24 due to regulatory directives imposed on Paytm Payments Bank (PPBL), Paytm recorded strong YoY growth, with monthly disbursals rising to Rs 2,009 crore in April 2024.
During Q4FY24, the distribution of merchant and personal loans (excluding distribution-only personal loans) was paused, and postpaid loan distribution was completely halted following the RBI directive. However, this business resumed in March and is seeing good latent demand. In FY25, the company will drive credit growth through a distribution-only disbursement model, with collections managed directly by lending partners.
"Over the past eight months, we have scaled up distribution only personal loans meaningfully. We are pivoting towards a distribution-only model as it will enable Paytm to offer loan distribution with a much diversified set of partners, and will reduce concentration risk considerably," the company informed.
In view of industry data suggesting deterioration of asset quality for personal loans, the company is targeting prime and super prime category customers, and offering them a better user experience and competitive interest rates. This segment of borrowers are more price sensitive, which could result in lower take rates (as a % of disbursal value) for Paytm.
Currently, the company acts as a distributor of loans and does not provide a First Loss Default Guarantee (FLDG) or other loan guarantees to lending partners. But it’s planning to consider offering FLDG in the future, given the explicit guidelines from the RBI and the suitability of this model for some potential lending partners.
The fintech major is also exploring distribution of unsecured business loans and secured loans such as loan against property (LAP) and Gold Loans. Paytm is currently conducting pilots and will scale these offerings based on customer and partner responses.
Personal loan and merchant loan are expected to normalise to earlier levels as existing as well as new lenders have started or are in pipeline to start disbursements. The distribution only loans have continued to scale well and the company has added more lending partners during the quarter, including pilots with banks.