For the secure, simple and seamless process of investing in IPOs, the National Payments Corporation of India (NPCI) on July 29th said that it's mandatory for retail IPO investors to pay through UPI-based ASBA (Applications Supported by Blocked Amount) option. The NPCI further announced that the norm will become applicable from Monday, July 29th as and when the first IPO gets listed. The rule will be applicable on all retail IPO investors buying IPO through broker, DPs and RTAs. UPI is an immediate real-time payment system that helps instantly transfer funds between two bank accounts through mobile phones. UPI is now mandatory in ASBA for retail investors applying through brokers, DPs and RTAs

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Speaking on the development Praveena Rai, COO, NPCI said, “The new process shall increase efficiency, eliminate the need for manual intervention and logistics at various stages. The UPI 2.0 mandate feature of one-time blocking shall ensure that the amount remains blocked (and not debited) in the customer’s account till allotment is done, as currently happening in the ASBA process,” adding, “The retail investors can enjoy the instant fund transfer experience of UPI while subscribing for IPO. The instant mandate creation ensures real-time application submission.”

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Speaking on the move Prakarsh Gagdani, CEO, 5Paisa.com said, "I think this is an extremely positive move. This will be an important step towards making IPOs completely digital and paperless. ASBA and UPI put together will liberate and empower small and first time investors for primary market."

The phase-wise implementation of UPI as a payment option started on Jan 1st, 2019. In Phase I, the UPI mechanism was made available to retail investors but the existing process of submitting physical applications from intermediaries to banks also continued. In the subsequent phase from July 1st, 2019, UPI payment for IPO has been made mandatory for retail investors applying through brokers, DPs and RTAs. The existing timeline of T+6 days post-issue closure will continue till the final phase is implemented.  

In the final stage, Phase III, the gap between IPO closing and listing will be reduced to three days. UPI as an option shall eliminate the need for segregation of bid-cum-application forms basis the investor banks and sending it to the respective bank locations. Manual verification of the customer’s signature on the application form is done away with as the same is substitutes by the customer authorizing the block by entering his UPI PIN on receiving the block collect request from the exchanges. The Registrar in this process shall co-ordinate with a single entity, the Sponsor Bank, for collating the details of the total block details and execution of allotment. Retail investors also have the options to submit the applications directly to the ASBA Banks (SCSBs) or to use the facility linked online trading, demat and bank account.