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SEBI To Introduce UPI Payment Mode For Retail Investors To Invest In IPOs

Roshni Agarwal

In a bid to further streamline the IPO process, the market regulator SEBI would introduce an alternate payment method as UPI or unified payments interface for retail investors to buy shares in the IPO. As per SEBI's circular, the new payment option shall be introduced from January 1, 2019 in a phased way.

In a SEBI circular released on Thursday, "The proposed process would increase efficiency, eliminate the need for manual intervention at various stages, and will reduce the time duration from issue closure to listing by up to 3 working days".

The circular added, "From January 1, 2019, the UPI mechanism for retail investors through intermediaries will be made effective along with the existing process and existing timeline of T+6 days. The same will continue, for a period of 3 months or floating of 5 main board public issues, whichever is later".

In the current regime, retail investors invest in IPO issue either via broker ASBA facility or through bank ASBA. The new payment option in addition to increasing the efficiency of the current system will indeed limit manual intervention.

The application form for IPO submitted by retail investor category via intermediaries which is then moved physically to self-certified syndicate banks (SCSBs) for the purpose of blocking of funds will also come to an end.

In the new payment mode via UPI, investors would be required to establish an UPI ID at the bank. And there after in accordance with the existing rules, bid details will have to be provided in the IPO form along with the UPI ID on the exchange platform.

After completing the PAN validation process, the exchange would ask an investor to furnish his account details with the depository. Next the bid made as well as the UPI Id will be shared via online route with the sponsor or escrow bank that is appointed by the IPO issuing company.

Later when the funds have been received in the escrow account of the public issue, the IPO shares would be credited into the investors demat account.

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