Paytm will morph into a “pure payment service provider’’ such as GPay, PhonePe after the clampdown on its payment bank business by the Reserve Bank of India (RBI), analysts at Jefferies said on Monday.

The brokerage estimates the direct and indirect impact of the RBI’s action could lead to a 28 per cent year-on-year decline in 2024-25 revenues of the company that could lead to cash burns in parent One97 communications.

Paytm’s focus will now move to ensuring customer and merchant retention, Jefferies said.

The company will dip into its cash reserves of Rs 8,500 crore to retain users.

While the cashbacks or discounts may be raised to retain app customers — total expenditure on this count is Rs 400 crore in this fiscal — merchants can be offered discounts or free usage of their subscriptions. The estimated earnings on the subscription is Rs 1,200 crore in this fiscal.

Last Friday, the RBI extended the February 29 deadline by 15 days till March 15, 2024, for customers of Paytm Payments Bank Ltd (PPBL) to make deposits or credit transactions.

Later that day, Paytm shifted its nodal account to Axis Bank for the settlement of merchant payments which would replace the account that OCL was using with Paytm Payments Bank Ltd (PPBL).

One97 shares were locked at the 5 per cent upper circuit on Monday thereby extending its gains for the second consecutive session, on news of the collaboration with Axis Bank.

While the RBI has extended the usage timeline for PPBL accounts by 15 days, it did not provide any respite on the transition of wallet and FASTag accounts to any potential buyer.

“Hence, it removes any option of sale/transfer of said business and effectively signals the closure of the wallet business (including FASTags), affecting 2024-25E EBITDA by 20 per cent,’’ Jefferies said.

The brokerage moved OCL to “not rated’’ from “underperform’’.