Merchants being able to use Paytm QR code, Soundbox or POS terminal linked to a non-PPBL bank account is a ‘major positive’ for Paytm, according to Bernstein.

The brokerage firm has assigned an ‘Outperform’ rating to Paytm with a target price of Rs 600 and expects a 76 per cent potential upside on the stock price from the last closing price of Rs 341.30.

On February 16, the Reserve Bank of India extended the deadline for Paytm restrictions from the original February 29 deadline to that of March 15, as a respite measure for merchants.

The RBI's directives were not intended to disrupt Paytm's payment services, particularly its popular UPI payments feature, Bernstein emphasised.

According to Bernstein analysts Pranav Gundlapalle, Ishan Mittal, and Dhruv Luthra, the developments are "incrementally positive." 

While immediate challenges persist, there are clear pathways for Paytm to navigate these regulatory challenges successfully, as per the analysts.

Paytm could continue merchant payments from its payment devices, including QR codes, soundbox, and card machines after the March 15 deadline as long as they are not linked to Paytm Payments Bank. 

The extension of the cut-off date to March 15 provides Paytm with a larger window to implement necessary changes in response to regulatory requirements, it further stated.

The extension of cut-off dates to March 15 provides Paytm with additional time to implement necessary changes for a smooth transition, as per the report’s highlights.

The incremental positives suggested by the firm were that merchants keep using these payment solutions while Paytm should  enable these payments, and partner with other banks to switch over nodal accounts.

The firm also highlighed there was no explicit exception provided for a bulk transfer of wallets/Fastags to another bank, which was ‘a largely expected negative,’ the firm said.

The balances can however be transferred to another wallet.

Measures by Paytm

Paytm is shifting nodal Paytm Paytments Bank accounts to Axis Bank, the listed fintech announced shortly after the RBI guidelines. The stock of the company has surged 5 per cent after the RBI respite till 15th March.

This means users have more time to shift their Paytm-linked account for QR and UPI to a third-party banking app. Paytm said it has partnerships with prominent state and private banks, which can be used to link the UPI and other digital payments.

This will make Paytm a digital aggregator like its fintech contemporaries Google Pay, PhonePe and others.

The linked services of Paytm Payments Bank and digital transactions through Paytm helped users pay electricity, water and other bills, recharge mobiles and recharge Fastag.

This account transfer is more critical for merchants who have their nodal account in Paytm Payments and receive digital payments in Paytm.

The RBI announcement also comes primarily for merchant respite.

Even after the deadline, users can withdraw amounts but not make new deposits.