Paytm Money on Tuesday announced its plan to launch a loan against stocks and mutual funds. In September 2017, the fintech company launched a direct mutual fund platform. The company reported investments worth Rs.5,000 crores through its platform in February current year. The company introduced direct stock trading for its customers in September.
Varun Sridhar, CEO of Paytm Money, said that the company had seen some of their investors shift mutual fund allocations to stock trading. Average SIP amounts increased this year, particularly from more experienced investors.
Sridhar said that as the leading direct mutual fund distributor and wealth platform, managing customers’ short-term liquidity needs or unforeseen costs is their priority. The company is studying the launch of a simple loan against securities products include both mutual funds and invested stocks. The key is a few click experiences, lower than the pricing of unsecured loans, and a flexible product.
Paytm Money’s rival, Kuvera, in June, launched a loan against mutual funds, while players such as Groww are still studying the opportunity. According to data available on Kuvera’s website, an interest rate of 10.5% is charged, besides payment of Rs. 1,999 for these types of loans. The loan amount is a percentage of the mutual fund investment and changes according to the kind of mutual fund held.
Typically, fintech platforms tie-up with NBFCs to give this service to their customers and do not lend directly. Some other banks have also allowed online loans against mutual funds to enhance their traditional offline lending. The person familiar with the enterprise said that the platform had encountered teething issues with Registrar and Transfer Agents (RTAs) for facilitating this service. However, a representative of CAMS, India’s largest RTA, denied that this was the case.
CAMS pioneered the virtual lien marking solution for Loan against Mutual Funds in collaboration with a huge private financial bank more than 2 years ago and went live with other private sector banks earlier this year. It is designed for financiers based on the principle they will cater to a big set of MF distribution platforms and advisory structures, including fintech. There has been a rise in interest in this solution in the previous few months.