- Date : 18/07/2018
- Read: 3 mins
UPI may soon become an alternative payment option for retail IPO investors, as it aims to reduce paperwork for intermediaries and speed up the process
Unified Payments Interface (UPI) could speed things up in the near future in Initial Public Offerings (IPO) for retail investors. The Securities and Exchange Board of India (SEBI) is looking at introducing UPI as an alternative payment mechanism for retail IPO investors.
Since it’s a mobile real-time payment platform for instant bank-to-bank transfer, UPI can help reduce paperwork for intermediaries and speed up the listing process. It can also help reduce human errors and make transactions easier for investors.
SEBI will soon come out with a discussion paper on this.
Related: All about IPOs in India
How does the current process work?
Today, if you want to invest in an IPO, you can either do so via a bank ASBA (Application Supported by Blocked Account) or through broker ASBA. In the former, your (that is, the investor’s) account does not get debited till the shares are allotted. In the latter, the broker does the bidding and hands over the application form to your bank.
According to a report in The Economic Times, 70% of retail applications currently come through broker ASBA. It said that the regulator wants to do away with the segregation and physical delivery of IPO application forms by brokers to various bank branches because it is time-consuming and prone to errors, especially as most of the applications come on the last day of the issue. Besides, it takes a day or two to complete the process.
The regulator is of the opinion that UPI will bridge the time between IPO closing and listing, get rid of paperwork, and streamline the process.
Related: What is ASBA? All you need to know
How does UPI’s new process work?
As per SEBI officials, for the new payment process, investors will have to get a 16-digit UPI ID from their bank. They will then have to input the UPI ID along with the bid details on the form. Investors will then have to submit the forms to the broker, who will upload the details and the UPI ID on the stock exchange system.
In the next step, stock exchanges will validate the investor information and share it with the concerned bank. Then the bank will request the investor to authorise blocking of the funds in case of allotment via their phone. The investor will have to enter his UPI ID and his funds will be blocked. With the UPI app, investors can modify or withdraw the bid until closure.
How can I get a UPI ID?
Getting on to UPI is fast and easy. All you need is a bank account and a smartphone with an internet connection. It is important that your mobile number is linked to your bank account.
Download the UPI app and register online with your bank account. This will help you create your virtual ID. You then need to set your MPIN and you are ready to transact. No transaction costs are involved.
What is the industry’s take?
Industry stakeholders feel that the adoption of UPI for IPO investing will be challenging and take a long time. It will see slower acceptance in tier II and tier III cities. Bankers feel investors may find it difficult to use UPI and that the process of getting an IPO application should be kept simpler.
Unified Payments Interface (UPI) could speed things up in the near future in Initial Public Offerings (IPO) for retail investors. The Securities and Exchange Board of India (SEBI) is looking at introducing UPI as an alternative payment mechanism for retail IPO investors.
Since it’s a mobile real-time payment platform for instant bank-to-bank transfer, UPI can help reduce paperwork for intermediaries and speed up the listing process. It can also help reduce human errors and make transactions easier for investors.
SEBI will soon come out with a discussion paper on this.
Related: All about IPOs in India
How does the current process work?
Today, if you want to invest in an IPO, you can either do so via a bank ASBA (Application Supported by Blocked Account) or through broker ASBA. In the former, your (that is, the investor’s) account does not get debited till the shares are allotted. In the latter, the broker does the bidding and hands over the application form to your bank.
According to a report in The Economic Times, 70% of retail applications currently come through broker ASBA. It said that the regulator wants to do away with the segregation and physical delivery of IPO application forms by brokers to various bank branches because it is time-consuming and prone to errors, especially as most of the applications come on the last day of the issue. Besides, it takes a day or two to complete the process.
The regulator is of the opinion that UPI will bridge the time between IPO closing and listing, get rid of paperwork, and streamline the process.
Related: What is ASBA? All you need to know
How does UPI’s new process work?
As per SEBI officials, for the new payment process, investors will have to get a 16-digit UPI ID from their bank. They will then have to input the UPI ID along with the bid details on the form. Investors will then have to submit the forms to the broker, who will upload the details and the UPI ID on the stock exchange system.
In the next step, stock exchanges will validate the investor information and share it with the concerned bank. Then the bank will request the investor to authorise blocking of the funds in case of allotment via their phone. The investor will have to enter his UPI ID and his funds will be blocked. With the UPI app, investors can modify or withdraw the bid until closure.
How can I get a UPI ID?
Getting on to UPI is fast and easy. All you need is a bank account and a smartphone with an internet connection. It is important that your mobile number is linked to your bank account.
Download the UPI app and register online with your bank account. This will help you create your virtual ID. You then need to set your MPIN and you are ready to transact. No transaction costs are involved.
What is the industry’s take?
Industry stakeholders feel that the adoption of UPI for IPO investing will be challenging and take a long time. It will see slower acceptance in tier II and tier III cities. Bankers feel investors may find it difficult to use UPI and that the process of getting an IPO application should be kept simpler.
