Paytm plans to go gradual on sub-50,000-rupee-loans (about $600), it mentioned Wednesday, the primary to announce such a transfer for the reason that Reserve Bank of India, final month, advised banks to put aside extra capital to cowl private loans and lending through NBFCs on considerations that hovering demand might result in larger danger.

“There is a clear signal from the RBI to pull back, so we will,” mentioned a high banker at a mid-sized personal sector financial institution that lends to a few dozen fintechs.

“We have signalled to our fintech partners that we don’t want to be present in the less-than-50,000-rupees loan category.”

However, this pullback is just not on the expense of severing ties with fintech companions.

“While we don’t intend to completely cut back funding to fintech partners at this point, we have expressed our discomfort towards them going big on small ticket personal loans,” mentioned one other banker with a personal sector financial institution.

The sources declined to be recognized as they aren’t authorised to talk to the media.

Besides Paytm, a number of smaller fintechs have tie-ups with banks and non-bank finance firms (NBFCs) for small-ticket private loans and the pullback will weigh on the supply of such loans.

The trade’s total mortgage progress, estimates Macquarie, will average to 12%-14%, from above 15% at the moment.

Paytm’s inventory value tumbled 20% on its plans to rein in small loans, and likewise weighed on Aditya Birla Capital, a key lending associate that, in keeping with Morgan Stanley, Paytm mentioned was trying to scale down small-ticket loans.

Aditya Birla Capital didn’t reply to an e mail in search of remark.

Macquarie mentioned the regulatory monitoring round a financial institution’s progress and asset high quality has elevated, additional prompting warning.

A 3rd banker mentioned the government-owned financial institution he works at had requested its fintech companions to selectively situation such small loans.

“We don’t want to come under regulator’s lens,” the banker mentioned. “Better to stay away from that segment for some time.” ($1 = 83.3340 Indian rupees)

(Reporting by Siddhi Nayak and Ira Dugal; Editing by Savio D’Souza)

By Siddhi Nayak and Ira Dugal