Paytm poised to start its P2P lending business with Clix Capital

Clix Capital is in advanced talks with One97 Communications, which controls Paytm, for a strategic stake in its planned peer-to-peer (P2P) lending platform.

AION Capital, which has an 85 per cent stake in Clix Capital, was formed by buying the commercial lending and leasing business of GE Capital in India. The remaining portion of the equity in the company is held by former Genpact founder Pramod Bhasin and former head of DE Shaw in India Anil Chawla.

Paytm and AION Capital spokespersons declined to comment on the negotiations or share any details. However, a source close to Paytm said that talks were at an advanced stage, adding: “The two sides have had multiple discussions. Now the finer points of the deal are being discussed. This deal, if it happens, will help Paytm kick-start the P2P lending business.”  

According to other sources, Paytm has registered with the Reserve Bank of India (RBI) to run a P2P lending platform as an intermediary providing the services of loan facilitation via an app or the web. It has not begun this service.

P2P lending is a digital platform that matches borrowers looking for a loan and lenders who want to offer loans at various rates of interest with a maturity period of 36 months. Despite its popularity abroad, this platform has not taken off here where only around a dozen companies offer the service with disbursals which are less than Rs 100 crore.

P2P lenders generally charge higher rates of interest due to the profile of the borrowers who are mostly those who cannot get loans from other sources.

Another feature — and for some this is a constraint — is that the RBI has imposed a Rs 10 lakh cap on the exposure that a lender can have on the platform.

Given such a restriction and the current non-banking financial companies’ (NBFCs’) meltdown, P2P companies are finding it increasingly difficult to raise money from foreign investors to expand their platforms.  

Paytm has also started offering loans of up to Rs 1 lakh to its 10 million-odd merchants. Merchants can pay instalments daily, there are no prepayment charges or penalties, and incentives are paid for timely payments.

Clix Capital — which bought two non-banking financial companies’, GE Money and GE Capital CIS — had a lending book of over $500 million last year, according to Parth Gandhi, managing director (MD), AION Capital Partners.

 Currently, it has three lines of lending: Corporate, small and medium enterprises, and consumer lending. 

If the deal with Paytm materialises, it will be able to add another dimension to the business. Clix Capital is also planning to raise over $250 million from new investors to fund its growth plans.

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