Paytm on Friday received preliminary central bank approval for its payments services unit to issue prepaid payment products, including digital wallets, sending its shares to a record high.
The approval comes after the winding up of Paytm Payments Bank and would allow Paytm to run its wallet business independently of the payments bank that housed it for years.
Paytm Payments Services can offer prepaid payment instruments to customers after receiving the Reserve Bank of India's final authorisation, the company said.
The licence will open up revenue opportunities including a prepaid card business and indicates easing of regulatory friction and thus should be sentimentally positive for the stock, said Anand Dama, executive director and head of banking and financial services research at Nuvama Institutional Equities.
"Since this is just an in-principle approval, the final licence will take time and so the impact, if any, on revenue will be seen in financial year 2028," Dama said.
The company's shares rose as much as 1.8% to 1,960 rupees and closed 0.8% higher on Friday. The stock is up nearly 50% so far this year, aided by strong growth across its businesses.
Paytm launched its wallet business in 2014, and went on to become the largest digital wallet provider in the country. It transferred the business to Paytm Payments Bank in 2017 in line with regulatory requirements. The business came under pressure in 2022, when the RBI barred the bank from onboarding new customers.
The central bank tightened restrictions in 2024, barring the bank from accepting fresh deposits, credits and top-ups in existing customer accounts and wallets over persistent non-compliance and supervisory concerns. The restrictions effectively halted normal wallet-loading operations.
Earlier this year, the RBI cancelled Paytm Payments Bank's banking licence, which led to its winding up.