Paytm, India’s leading digital payments and financial services company, is offering collateral-free instant loans of up to Rs 5 lakh to small merchants in collaboration with scheduled commercial banks and NBFCs. The loans are available at a low interest rate and come with a unique daily EMI option, Mint reported.

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Merchants can avail loans under the merchant lending programme on the Paytm for Business app. Loans are disbursed after the app determines the merchant’s credit-worthiness based on his daily transaction, using an algorithm.

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As the process is completely digitised, no additional documents are required. The merchant can repay the loan through daily settlements with Paytm and no pre-payment charges are levied.

To avail the collateral-free loan, small traders can follow these five simple steps:

The merchant has to open the Paytm for Business app and click on the ‘business loan’ tab to check the offer available. As per the requirement, the merchant can increase or decrease the loan amount.

On choosing the loan amount, other details such as amount to be disbursed, total payable amount, daily instalments and tenure will appear.

The person availing the loan has to click on the check box to confirm the details and then click on the tab ‘get started’ to proceed. By giving consent to key in the KYC details from the CKYC, the merchant can enjoy the benefit of minimal documentation and quick processing.

The app then asks the borrower to fill in the PAN details, date of birth and email address. It then verifies the PAN, credit score and KYC details before sanctioning the loan.

On submitting the loan application, Paytm transfers the loan amount to the bank account.

Also read: PAN misuse? Indiabulls' Dhani app disbursed loans to strangers 'without consent', claim users

Meanwhile, One97 Communications Limited, the parent of the digital payments app, in a filing with the Bombay Stock Exchange (BSE) said it witnessed accelerated growth in its lending business.

In January 2022, the number of loans disbursed through the platform was up 331 percent year-on-year to 1.9 million loans, while the value of loans disbursed grew 334 percent year-on-year to Rs 921 crore.

Also read: How 'buy now, pay later' affect your credit score? Key things to know

(Edited by : Shoma Bhattacharjee)