Paytm shares dropped as much as 8.37% on Monday, hitting an intraday low of ₹1,051.05, after the Reserve Bank of India formally cancelled Paytm Payments Bank's banking licence. The stock trimmed losses and was trading around 3.78% lower at ₹1,103.75 by mid-morning, with Paytm's market capitalisation at roughly ₹70,553 crore ($7.4 billion).

What the RBI Actually Did

The RBI invoked Section 22(4) of the Banking Regulation Act, 1949, to cancel Paytm Payments Bank's licence with immediate effect. That means the bank cannot conduct any banking business going forward. The central bank cited governance failures, management concerns, conduct detrimental to depositors' interests, and non-compliance with licence conditions. The RBI has also said it will approach the High Court to begin winding-up proceedings, though it confirmed the bank holds enough liquidity to repay all depositors in full during that process.

The move formalises what was already a slow wind-down. The RBI barred Paytm Payments Bank from onboarding new customers in 2022, then blocked it from accepting fresh deposits in early 2024. By the time the licence was formally cancelled, the payments bank was already largely inactive.

Why Brokerages Are Not Panicking

Three major brokerages maintained bullish ratings on Paytm despite the news. Bernstein kept its Outperform rating with a ₹1,500 target, noting Paytm had already written off its investment in the payments bank, making any incremental financial damage minimal. Bernstein also flagged that the closure could eventually allow Paytm to apply for an NBFC or prepaid payment instrument (PPI) licence. Jefferies held its Buy rating with a ₹1,350 target, pointing out that the wallet business was already shut, UPI handles had been transferred, and key agreements terminated well before this cancellation. Goldman Sachs kept a Buy call but trimmed its target slightly to ₹1,400 from ₹1,470, flagging customer and merchant sentiment as the main risk to watch.

The consensus is that Paytm Payments Bank had been ring-fenced from the listed parent entity well in advance, so there is no direct hit to revenues or operations. Paytm's core services — UPI payments, merchant tools, and lending distribution — continue to run through separate licensed entities. Its subsidiary Paytm Payment Services Limited holds a payment aggregator licence covering offline and cross-border payments, obtained after the 2024 restrictions.

On the financials, Paytm turned profitable in Q3 FY26, reporting a net profit of ₹225 crore against a net loss of ₹208 crore a year earlier. Revenue rose 20% year-on-year to ₹2,194 crore, and EBITDA came in at ₹156 crore with a 7% margin. Q4 FY26 results have not yet been disclosed.

The key things to watch: how quickly the High Court winding-up process moves, whether depositor repayments proceed smoothly, and whether Paytm moves to apply for an NBFC or PPI licence now that the payments bank chapter is formally closed. Sentiment among merchants and consumers will be the variable brokerages are most cautious about in the near term.