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Paytm Money mulls launching loan against stocks, mutual funds

Some banks have enabled online loans against mutual funds, to supplement their traditional offline lending. (Since the IL&FS defaults, it can be noted that NBFCs and housing finance companies (HFCs) were facing a crisis of confidence, sending call money rates higher and overall liquidity tight.)Premium
Some banks have enabled online loans against mutual funds, to supplement their traditional offline lending. (Since the IL&FS defaults, it can be noted that NBFCs and housing finance companies (HFCs) were facing a crisis of confidence, sending call money rates higher and overall liquidity tight.)

  • The fintech major, which launched direct mutual fund platform in September 2017, reported investments worth 5,000 crore through its platform in February this year

Paytm Money is planning to launch loan against stocks and mutual funds, it said Tuesday. The fintech major, which launched direct mutual fund platform in September 2017, reported investments worth 5,000 crore through its platform in February this year. Later in September, the company introduced direct stock trading for its customers.

The platform has seen investors shift some of their mutual fund allocations to stock trading, Varun Sridhar, CEO of Paytm Money told Mint. It has also seen an increase in the average SIP amounts this year, particularly from more experienced investors.

"As a leading direct mutual fund distributor and wealth platform, managing customers’ short-term liquidity needs or unforeseen expenses is our priority. We are thus considering and studying the launch of a simple loan against securities products involving both mutual funds and invested stocks. The key is a few click experience, lower than unsecured loans pricing and a flexible product," said Sridhar.

Kuvera, Paytm Money's rival, launched loan against mutual funds in June, while players such as Groww are still studying the opportunity. According to information available on Kuvera’s website, an interest rate of 10.5% is charged, besides a fee of 1,999 for these types of loans. The loan amount is a percentage of the mutual fund investment and varies according to the type of mutual fund held.

Typically, fintech platforms tie up with NBFCs to provide this service to their customers and do not lend directly. Some banks have also enabled online loans against mutual funds, to supplement their traditional offline lending.

The platform had encountered teething troubles with Registrar and Transfer Agents (RTAs) for facilitating this service, a person familiar with the business told Mint on condition of anonymity. However, a spokesperson for CAMS, India’s largest RTA denied that this was the case.

“CAMS pioneered this digital lien marking solution for Loan against Mutual Funds in collaboration with a large private bank over 2 years ago and have gone live with another private sector banks earlier this year," she said.

“Our solution is designed for financiers on the principle they will cater to a wide set of MF distribution and advisory platforms, including fintechs. There has been increased interest for this solution in the last few months. We have customized it for a large NBFC and slated to go live with them in the coming week. Fintechs and other MF distribution platforms will plug into the solution via the financier. We have a dedicated team actively engaging with other top tier financiers for integrating their platform," she added.

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