New Delhi: Payments services and e-commerce firm Paytm on Monday said it has started offering collateral-free working capital loans for merchants on its platform.

One97 Communication Ltd, which operates the Paytm platform, has partnered with financial institutions such as Capital Float, which will offer loans to merchants such has kirana stores, auto and taxi drivers and milk cooperatives based on their payments history, said the firm in a statement. A range of other lending institutions, including Aditya Birla Finance and Capital First, have indicated interest in joining as partners, it added.

These small loans would be in the range of Rs10,000 to Rs1 lakh, which can be increased later based on the eligibility criteria and the working capital needs of merchants, Paytm said.

Paytm uses credit profile based on the transaction history of merchants on its platform. The profile is built from multiple factors like the value and volume of transactions.

Four lakh offline merchants already accept Paytm. The number is expected to cross 1 million by December 2016.

“Financial inclusion is our main agenda. Availability of unsecured loans at low interest rates has been a challenge for small merchants till now, forcing them to borrow through high-cost methods like chit funds. By accepting payments through Paytm consistently, merchants can now get a digital footprint at zero cost, courtesy which they will get access to low-interest loans," said Kiran Vasireddy, senior vice-president at Paytm.

The payments firm recently entered into strategic alliances with retail chains such as Spencer’s Retail, More, WH Smith, Kendriya Bhandar, Heritage Fresh, V2 Retail, Vivek’s Store, Value Plus, etc. wherein users can make payments using Paytm.

Paytm is already accepted at quick service restaurants including KFC, Pizza Hut, Cafe Coffee Day, Costa Coffee, Barista and Vaango.

Paytm has received investments from Alibaba Group, SAIF Partners and Sapphire Venture. The company was launched in 2014 and as of April, Paytm wallet claimed to have over 120 million users, with over 90 million transactions every month.

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