Retail investors can soon pay via Unified Payments Interface

Sebi said it will launch Unified Payments Interface as an alternative payment option for retail investors, buying shares in a public issue, in a phased manner from January 1 next year, which will cut listing time for an IPO to three days from six at present.

The new mechanism will increase the efficiency of the existing system and curtail the need for manual intervention. UPI is an instant payment system developed by the National Payments Corporation of India (NPCI). It allows instant transfer of money between any two person's bank accounts using a payment address which uniquely identifies a person's bank account.

As a part of the continuing efforts to further streamline the process, Sebi has decided, in consultation with the stake holders to introduce the use of UPI as a payment mechanism with Application Supported by Block Amount (ASBA) for applications in public issues by retail investors through intermediaries.

“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 Securities and Exchange Board of India (Sebi) said in a circular.

Currently, retail investors either invest in an IPO through bank ASBA or through broker ASBA, where the broker does the bidding and hands over the application form to the investors bank. Considering the time required for making necessary changes to the systems and to ensure complete and smooth transition to UPI payment mechanism, the regulator said that the new mechanism and consequent reduction in timelines will be introduced in a phased manner.

“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,” it added.

Thereafter, for applications by retail investors through intermediaries, the existing process of physical movement of forms from intermediaries to self-certified syndicate banks (SCSBs) for blocking of funds will be discontinued and 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 noted.