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10
May

How will UPI help in streamlining IPO investment?

SEBI had recently announced to introduce UPI (United Payment Interface) as a voluntary payment option for the retail investors and then make it the only payment option after the procedures stabilize. Under Phase I, the optional UPI mechanism will continue till 30th June 2019, provided five main board public issues have been launched till that period. After that, the UPI payment will be made mandatory. Let us discuss how this process will help in streamlining the process of applying in IPO.

 

UPI 2.0 for Blocking Amounts for IPO Applications

  1. The pre-requisite for submission of the application with the intermediary is the UPI ID of the Retail Individual Investor (RII), with a maximum length of 45 characters (Example: InvestorID@bankname).
  2. The investor will fill the bid details in the application form along with his/ her bank account linked UPI ID and apply with any of the intermediary, which will then be uploaded by the intermediary in the stock exchange bidding platform.
  3. The investor will receive a confirmation SMS from the exchange regarding submission of the IPO application.
  4. Post the validation of the demat details with the depository; the stock exchange will electronically share the bid details and the UPI ID of the investor with the Sponsor Bank appointed by the issuer.
  5. The Sponsor Bank will initiate the blocking of funds equivalent to application amount and subsequent debit of funds in case of allotment. As a result, a notification will be pushed to the investor’s UPI app which will be required to be validated by the investor.
  6. The investor would be able to view the amount to be blocked as per the bid in such notification. An attachment will also be shared along with the block request, providing the necessary details regarding the IPO application. Post validation of the details, the investor must approve the block request.
  7. The stock exchanges will also display the information containing the status of block request (e.g., accepted/ decline/ pending) and will also be shared with RTA in the form of a file for reconciliation.
  8. The investors will continue to have the option to modify or withdraw the bid until the closure of the bidding period. For each such modification of bid, the investor will be required to submit a revised bid and then go through the steps above to validate the modified block request.

 

Benefits of UPI in IPO Application Process

UPI brings along the following benefits to the IPO application process:

  1. Eliminating the physical movement of application forms – When the investor submitted the forms with the intermediary, the applications were required to be sent physically to the bankers for blocking the requisite amount. UPI helps the investors to authorize the block amount themselves through the mobile apps and hence, the movement of applications and data for records can be done digitally.
  2. Squeezing the Listing Timelines – With the introduction of UPI as a payment mechanism, SEBI aims to compress the IPO listing timelines to 3 days of the issue closure, as against six days presently. This will be achieved as a result of efficiencies through the digital movement of the applications and data within the different agencies.
  3. Rejection of Third Party Payments – Under ASBA, one account holder may apply for the IPO for more than one applicants. However, the UPI ID will help the bank to identify third-party payments, which will thereafter initiate a technical rejection of the application by the Registrar & Transfer Agent (RTA).

 

As such, UPI is expected to improve efficiencies and eliminate the need for manual intervention at various stages. Edelweiss Partners provides you comprehensive information about various current and past IPOs, helping the investors to make informed decisions in respect of the public issue and also provides the active subscription status for the ongoing IPOs.

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