The Reserve Bank of India (RBI) has adjusted its risk weight norms for unsecured loans, a move that is expected to slightly increase the cost of personal loans offered by digital payment solutions giant Paytm. The central bank's revision will likely lead to an approximate 50 basis point rise in the cost of these loans.
Despite this development, Paytm's 'buy now, pay later' (BNPL) and merchant loan products are anticipated to face minimal disruption. This resilience stems from the short-term nature of BNPL loans and the classification of merchant loans under priority sector lending.
In response to the RBI's decision, BofA Securities projected on Friday that Paytm would pass on the increased costs from the credit risk weight adjustment to consumers. Nevertheless, BofA Securities does not expect a significant impact on Paytm's target for a 30% growth rate in its personal loan segment. The slower formation of new partnerships with banks and non-banking financial companies (NBFCs) is also unlikely to have a marked effect on Paytm’s financial projections for FY25, with less than a five percent decrease in EBITDA anticipated.
Maintaining confidence in the company's strategy, BofA Securities has upheld a 'Buy' rating on One97 Communications Ltd., Paytm's parent company. It suggested that any performance surpassing expectations or the acquisition of additional partners could be positively received by investors and the broader market.
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