The RBI’s recent move has stopped the Paytm‘s lending dreams, and you might be wondering why! Let me break it down for you in simple terms.

The RBI decided to increase the Risk WEIGHT to 125%.

Now, you might be thinking, What’s Risk WEIGHT?

Imagine HDFC lending Rs.100/- (loan). Here’s the catch:

Rs.8/- needs to come from HDFC’s CAPITAL, and the remaining Rs.92/- comes from people like you and me who have deposits with HDFC.

Now, with the 125% Risk WEIGHT, banks will have to set aside Rs.10/- for every Rs.100 lent.

How does this impact Paytm?

Well, Paytm, not being a bank or NBFC, relies on lending partners. These partners, with the increased risk rate, now need more of their capital to lend out the same amount, thereby reducing Paytm’s commission.

Paytm’s only solution in the short term is to offer merchant loans! They have much lower default rates and lower risk than a retail customer of Paytm.

Source: Growthx

#fintechnews #paytm #rbi #financeinnovation #manispeaksmoney

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