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Shares of India's Paytm rose a stock exchange-allowed maximum of 5% on Friday, a day after it got a third-party application provider license that will allow it to offer digital payments after its banking unit ceases operations.

The license, granted by the country's payments authority, came as Paytm Payments Bank will cease to operate on March 15, following regulatory action due to non-compliance with certain norms.

Paytm's shares were up 5% at 370.70 rupees early in the session, set for its best day in two weeks, with its trading volume of over 4 million shares already making it the stock's fourth busiest day this month.

Still, the stock has just over halved in value since late January when the Reserve Bank of India ordered Paytm Payments Bank to stop accepting fresh deposits in its accounts or popular wallets.

The third-party app provider license, brokerage UBS said in a note, means Paytm will operate like its competitors such as Google Pay and PhonePe, likely shifting investor focus to operational performance over regulatory headwinds.

However, Jefferies said that for Paytm to retain customers and merchants, it will have to dip into its cash reserves of 85 billion rupees ($1.02 billion).