'UPI for secondary market' launches on Monday: What it is
The National Payments Corporation of India (NPCI) will launch 'UPI for secondary market' beginning with a beta phase for the equity cash segment on January 1, 2024. With this payment system, investors can "block funds in their bank accounts, which will only be debited by the Clearing Corporations upon trade confirmation during settlement," per NPCI. Clearing Corporations will process payouts to these clients on a T+1 basis. UPI will see wider use in the stock market going forward.
It is similar to the ASBA facility
UPI for secondary market closely resembles the established Application Supported by Blocked Amount (ASBA) facility. ASBA has played a crucial role in minimizing the time gap between the closure of an issue and the listing of shares. NPCI reports that UPI for secondary market enjoys backing from key stakeholders, including clearing corporations, stock exchanges, depositories, stockbrokers, banks, and UPI app providers. UPI has emerged as the most popular payment method for IPO applications, capturing around two-thirds of the market share.
Beta phase and participants
During the trial period, a select group of customers can block funds in their bank accounts, which will only be debited by clearing corporations upon trade confirmation during settlement. Clearing corporations will promptly initiate payouts to these clients on a T+1 settlement basis, ensuring that all trades are settled within one day of the transaction's completion. These transactions will not incur any additional fee.
It will be accessible through these platforms
In the beta phase, UPI for secondary market will be accessible on the trading app Groww, with NPCI's BHIM app, Groww, and Yes PAY NEXT as UPI apps facilitating the process. On the banking end, HDFC Bank and ICICI Bank customers can participate, while HDFC Bank, HSBC, ICICI Bank, and Yes Bank serve as sponsor banks for clearing corporations and exchanges.
Expansion plans and future participants
NPCI revealed that stockbroker Zerodha and customer banks like Axis Bank are in the certification stage and will soon join the beta launch. Furthermore, UPI-enabled apps such as Paytm and PhonePe are also preparing to participate.
