Starting from November 1, 2024, individual investors in India will need to use UPI (Unified Payments Interface) for bidding in public issues of debt securities, non-convertible redeemable preference shares, municipal debt securities, and securitised debt instruments. This new mandate by the Securities and Exchange Board of India (SEBI) is aimed at streamlining the application process and aligning it with the existing rules for equity shares and convertible public issues.

Why the change?

SEBI's move comes as part of a broader effort to make public investment processes more efficient and user-friendly. By requiring the use of UPI for applications up to ₹5 lakh, SEBI hopes to:

1. Simplify fund blocking: UPI allows real-time blocking of funds during the bidding process, removing delays in fund transfers and ensuring quicker access to funds for issuers.

2. Reduce reliance on paper-based processes: By digitising more of the application process, SEBI aims to reduce administrative overhead and make it easier for investors to participate.

While UPI will be mandatory for these smaller transactions, investors will still have the option to use other methods, like Self-Certified Syndicate Banks (SCSBs) or stock exchange platforms, for larger investments or different types of securities.

How this affects you as an investor?

For retail investors applying for amounts of up to ₹5 lakh, this change means you must now ensure that your UPI ID is linked to your bank account when applying for debt securities through intermediaries like stock brokers or registrars. This move is particularly beneficial for individual investors who want a faster, more secure, and hassle-free way to participate in public issues.

However, if you are investing larger amounts or prefer traditional methods, the option to use SCSBs or the stock exchange platform remains available.

Streamlining the process

In addition to the UPI mandate, SEBI has made other amendments to speed up public issue processes. For instance, it has reduced the time allowed for seeking public comments on draft offer documents from 7 working days to 1 day for certain issuers, and shortened the subscription period to 2 working days for public issues​.

The bigger picture

This regulation is part of SEBI's broader push toward greater transparency and efficiency in the financial markets. By digitising payments and reducing reliance on traditional methods, SEBI aims to make the capital markets more accessible to a broader range of investors.

With UPI becoming a more integral part of the financial ecosystem in India, these changes reflect the ongoing shift toward digital transactions in the country's financial landscape. This move is expected to increase participation from retail investors, making the process simpler and faster for those looking to invest in public debt securities​ (Devdiscourse)​ (TaxGuru).

As we approach the implementation of these new rules, it’s a great time for investors to familiarise themselves with the UPI process and prepare for a smoother, more streamlined investment experience.