SEBI Recommends UPI Guardrails Against Market Frauds

The market regulator, the Securities and Exchange Board of India, on Friday came out with the proposals for investors to be able to make transactions with registered entities like brokers through UPI. The regulator has proposed that such transactions will not be facilitated with unregistered entities and will safeguard investors from fraudulent elements.

Additionally, the market regulator has proposed to increase the upper limit on the UPI-facilitated capital market transactions from Rs. 2 lakh to Rs. 5 lakh. This is subject to further consultations with the National Payments Corporation of India.

The regulator has also floated the idea of using @payright as the appropriate UPI handle for this purpose.

The new system has been proposed to involve SEBI, NPCI, banks, and registered intermediaries.

As per the SEBI consultation paper, NPCI has confirmed that issuing new UPI handles is a routine process for them, and banks are already equipped to integrate these new handles. Once NPCI enables the system, intermediaries will be able to obtain their new UPI IDs from their respective banks. The allocation process will be OTP-based, ensuring security and verification through SEBI’s SI Portal.

Further, in order to facilitate the system, all stakeholders will have to fulfil certain functions. Firstly, the broker and mutual funds, being the investor-facing intermediaries, have been proposed to update their mobile numbers and email IDs in the SEBI portal. Post this, they will have to obtain the new UPI ID from their bank and start using it.

Thereafter, they will have to inform investors about the new UPI system through emails, SMS, websites, and social media and ensure that existing mutual fund SIPs continue without disruption, but new SIPs should use the updated UPI IDs.

On the other hand, the self-certified syndicate banks (SCSBs) must verify intermediaries using SEBI’s authentication system before issuing UPI IDs. They will also have to conduct due diligence and only allocate UPI IDs to verified entities.

Meanwhile, Market Infrastructure Institutions (MIIs) must conduct awareness campaigns to educate investors about the new payment mechanism.

The suggestions are open to public consultation till Feb 21.