Paytm raises collateral-free loan cap to Rs 5 lakh for micro lenders

Sharpening its focus on the merchant lending business, financial services platform Paytm aims to double its loan disbursements this financial year to Rs 1,000 crore from Rs 550 crore disbursed in FY20. It has also expanded collateral-free loans cap from Rs 2 lakh to up to Rs 5 lakh at a low-interest rate of 1-2 per cent micro-merchants.

“With our collateral-free instant loans, we are trying to help kirana stores & other small business owners who have been left behind by the traditional banking sector and do not have easy access to loans and credit. Going forward, we will especially focus on EDC merchants and provide higher loan amount based on their EDC transactions,” said Bhavesh Gupta, CEO, Paytm Lending.

The company claims it has so far equipped over 17 million merchant partners across the country with Paytm All-in-One QR enabling them to accept payments via Paytm wallet, bank accounts, UPI and Rupay Cards directly into their bank accounts at zero per cent fee.  

The company offers collateral-free loans under its Merchant Lending Programme in Paytm for Business app. Its algorithm determines the credit-worthiness of the merchant based on his daily transactions and arrives at a pre-qualified loan offering. The firm has digitised the process starting from the loan application, approval to disbursal with no additional documents required in partnership with NBFCs and banks. Loan repayment is primarily collected from the merchant’s daily settlement with Paytm and there are no prepayment charges on these loans. 

Earlier this year, Google India had also said it will work with financial institutions to help merchants get loans via its Google Pay for Business offering.