Paytm starts offering unsecured loans to small business

Mobile wallet firm Paytm, which aspires to become a digital bank, has started offering unsecured loans to small merchants such as neighbourhood grocers or the mobile recharge shops or the auto drivers who use the wallet to accept offline payments.

''This is for all those who cannot get a loan from the bank because they do not have a credit profile,'' said Kiran Vasireddy, senior vice president, Paytm.

Paytm maps the wallet usage of merchants and based on this data makes credit profiles. Using this data it decides what amount to give to which merchant. The annual interest rate is 12 per cent, but is connected to the tenor of a loan. ''We are giving loans to 5-10 people every day,'' said Vasireddy.

The loan amount ranges from Rs5,000-100,000, and will go up eventually. Paytm has partnered with large financial institutions and NBFCs to fund these loans. This is not the first time an internet company is offering loans. Flipkart, Snapdeal and Amazon offer loans, but only to people who sell on their platform.

Mobikwik, a Paytm rival is looking at a similar offering. ''We will start giving loans to merchants who use the Mobikwik wallet in the next 3-6 months,'' said Upasana Taku, co-founder of Mobikwik.

Paytm already has 400,000 offline merchants including Mother Dairy booths and petrol pumps. By the end of 2016 it expects to have a million offline merchants, and four million by end of 2017.