Paytm shares dropped 8% after the Reserve Bank of India cancelled Paytm Payments Bank Limited's (PPBL) operating licence, but the stock recovered quickly as major brokerages held their bullish calls on the parent company, One97 Communications.

The RBI move ends PPBL's ability to operate as a payments bank, a significant regulatory action. But analysts at Jefferies, Goldman Sachs, and Bernstein all argued the financial damage to Paytm's core business is limited. Their reasoning centres on one key fact: One97 Communications and PPBL are structurally separate entities, and Paytm had already been migrating its payment and merchant services away from PPBL following earlier RBI restrictions.

Why Brokerages Are Staying Positive

All three brokerages retained positive ratings on Paytm after the cancellation. The common thread in their analysis is that PPBL was no longer deeply embedded in Paytm's main revenue streams. Paytm's core business — payment processing, merchant acquiring, and financial services distribution — does not depend on PPBL holding a live banking licence to function.

Bernstein, Jefferies, and Goldman each pointed to strong momentum in Paytm's non-bank operations as a reason to look past the licence loss. The separation that regulators effectively forced on Paytm earlier appears to have reduced the blast radius of this final cancellation.

Risks That Remain

Even with the bullish analyst consensus, risks to market sentiment are real. The RBI cancellation is a reputational event, not just a regulatory one. Retail investors and merchants may associate the Paytm brand with regulatory trouble, which could weigh on user growth or partner confidence even if the financials hold up.

On the charts, technical analysts see near-term volatility ahead. Key support for the stock sits around Rs 1,050, with resistance near Rs 1,150. A break below support could accelerate selling, particularly if sentiment stays cautious around fintech regulation in India more broadly.

The episode also raises a wider question for the Indian fintech sector: how much does a payments bank licence matter to a large digital payments platform that has already diversified its banking relationships? For Paytm, the answer from its advisers is — less than feared. But the market will take time to fully price that in.