An alternative payment option in form of Unified Payments Interface (UPI) would be launched by Securities and Exchange Board of India (SEBI) for retail investors for buying shares, the market regulator said in a circular.
As a part of the continuing efforts to further streamline the IPO process, an alternative payment option in form of Unified Payments Interface (UPI) would be launched by Securities and Exchange Board of India (SEBI) for retail investors for buying shares, market regulator said in a circular. The option would be launched in a phased manner from January 1, 2019, SEBI said. “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,” SEBI said in a circular on Thursday.
The new payment mechanism will limit the need of manual intervention and also increase the efficiency of the existing system, the market regulator said. At present, the non-institutional investors invest in a public issue either through bank ASBA or through broker ASBA, where the broker does the bidding.
“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,” SEBI added.
For the applications submitted by the retail investors through intermediaries, the current process of physical movement of forms from intermediaries to self-certified syndicate banks (SCSBs) for blocking of funds will end. Thereafter, only the UPI mechanism with existing timeline of T+6 days will continue, for 3 months or floating of 5 main board public issues, whichever is later, Sebi said.
An investor would be required to create an UPI ID at the bank. According to the current practice, the investor would be needed to enter the details of the bid in the form and also the UPI ID. Thereafter, the forms would be submitted to the broker who would then upload the details along with UPI ID on the stock exchange platform.
The exchange would now demand investor account details with the depository after undertaking validation of the PAN. After this, the bid details along with the UPI ID would be shares electronically by the exchange with the escrow or sponsor bank appointed by the issuer.
A mandate request will be initiated by the sponsor bank on the investor to authorise blocking of funds equivalent to application amount in his or her bank account and thereafter, debit of funds in case of allotment. The shares would be credited to the investors account upon confirmation of receipt of funds in the public issue escrow account.