UPI-based system mulled for retail investors in IPOs

UPI-based system mulled for retail investors in IPOs

The securities and Exchange Board of India (Sebi) is considering introducing a UPI-based payment system for retail investors in initial public offerings (IPOs), a move that will help do away with cheque payments and reduce the time taken between the closing of an IPO and listing of the security to just three days.

Sources in the know said Sebi and National Payments Corporation of India (NPCI), which manages the UPI (unified payments interface) protocol, were studying the feasibility of the proposal. Initial feedback received by the market regulator from stakeholders was that the project could be executed with a few tweaks to teh current payment framework, said a source

The UPI system developed to promote digital payments in the country . enables instant and seamless payments frome one bank account to another through a mobile-based application. The platform is rapidly gaining acceptance, with over 70 banks being empanelled. Also, there are dozens of popular application integrating the UPI interface and providing multi-bank access. Facebook-owned messaging giant. WhatsApp, too is soon expected to officially launch a UPI-enabled payment feature

UPI based payments could provide a fillip to IPO investing. With smartphones and data becoming ubiquitous, this will help bringalot of investors into the equity fold,” said an investment banker, adding that the proposal was being discussed by Sebi.It now takes six working days for a company to list after its IPO closes.

The regulator intends to reduce this time but has been facing impediments, particularly related to processing physical application forms and cheque payments of retail investors.Sebi has made online applications compulsory for nonretail investors, which includes institutional investors and high networth individuals (HNIs). However, the regulator still allows physical applications from small investors due to issues over the reach of the online application facility.

According to sources, doing away with the physical application form is necessary to bring down the timeline further.The regulator is studying various proposals in this regard, including electronic payments to exchanges and UPI payments.The regulator was keen on opting for a method that would have panIndia reach, said a source.UPI payments in their current form pose certain challenges.

While retail investors can invest up to Rs 200,000 in an IPO, the maximum remittance allowed through the UPI facility is Rs 100,000. Sources said there was a proposal to double the transfer amount allowed under the UPI.If implemented, UPIbased payments will allow investors to bid for the maximum account.

Other issues include linking of demat accounts with UPI applications and lack of availability of the application supported by blocked amount (ASBA) facility, where funds stay blocked in an investor´s account.

“UPI based payments for IPOs are possible.However, it will require some software related changes to the current framework.In the existing system, investors´ money is transferred an escrow of the issuer without allotment.

However, if the IPO process is shortened to three investors will mind this.All have underlying bank accounts, hence the KYC (know your client) requirement is done.However, there has to be a system where the demat accounts, too, are linked,” explained the head of digital banking ataprivate bank.The year 2017 saw the highest ever mobilisation by way of IPOs of close to Rs 700 billion. The momentum is expected to continue this calendar year as well.

The Business Standard, New Delhi, 27th February 2018

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said. Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm

Credit card spending growth declines on RBI gaze, stress build-up

Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem. “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and

CA Online

Search This Blog