SEBI: Eligible stock brokers will have to allow their clients to use UPI (Unified Payment Interface) based 'block' system for buying and selling of shares from February 1. In the UPI block system, traders will not need to pay the broker in advance. They will be able to trade in the secondary market based on the amount blocked in their bank accounts. In the new system, brokers will either have to allow their clients to use the UPI-based 'block' system in the secondary market (cash segment) or they will offer three facilities in one trading account. The UPI based block system will be like SBA (Application Supported by Blocked Amount).

What facility will be available?

SEBI's board of directors approved this proposal on Monday. Under this, eligible stock brokers will have to either allow their customers to use the UPI-based 'block' system in the secondary market (cash segment) from February 1 next year or they will offer three facilities in one trading account. Customers of eligible stock brokers will have the option to either continue the existing facility of trading by transferring funds to trading members or opt for a new facility. Brokers will offer three facilities in one trading account. Under the three facilities, savings account, demat account, and trading account are combined. In this case, the customers will have their funds in their bank account and will get interest on the balance. Eligible stock brokers (QSBs) will have to offer one of these two options, in addition to the existing method of trading.

IPO investors get benefits

Market regulator SEBI had started the facility of blocking funds in the account itself as a payment system for applications submitted by retail investors through intermediaries for public issues like IPO in January 2019. Under this, the use of UPI approved by RBI was started.

Rahul Jain, Chief Financial Officer, of NTT DATA Payment Services India, said, "At a time when UPI payments are witnessing significant growth, this initiative will empower and benefit investors with improved transparency, interest income, and ease of payments along with robust security."