Paytm, the parent company of One 97 Communications Ltd, witnessed a decline of more than 2% in its shares during Friday’s trading session, primarily due to a widespread sell-off in financial stocks. According to foreign brokerage CLSA, the recent decision by the Reserve Bank of India (RBI) to raise risk weights for unsecured retail loans, including those for consumer durables and credit cards, may lead to a slowdown in loan growth for banks in the coming quarters. This, in turn, could have a cascading effect on the growth rates of fintech intermediaries like Paytm.

Although CLSA acknowledges the potential impact on Paytm, it believes that the repercussions might not be substantial. The brokerage points out that most of Paytm’s Non-Banking Financial Company (NBFC) partners have a relatively small share in unsecured lending. Additionally, Paytm is actively onboarding new lending partners, thereby reducing its reliance on existing ones. Despite these factors, Paytm shares experienced a decline of 3.88% on Friday, reaching a low of Rs 870.20 on the Bombay Stock Exchange (BSE).

Jefferies, another financial services company, noted that Paytm’s lending partners could face higher funding costs and increased capital requirements, affecting the profitability of products such as Buy Now, Pay Later (BNPL).