NPCI brings UPI for Secondary Market to diversify its offerings

By Gloria Mathias

The National Payments Corporation of India (NPCI) has introduced a new facility for trading in the stock market. This facility is like the Application Supported by Blocked Amount (ASBA) but is designed specifically for the secondary market.

It is based on a block mechanism approved by the Securities and Exchange Board of India (SEBI). The concept is inspired by the Reserve Bank of India (RBI)-approved facilities of single-block and multiple-debit used in UPI transactions.

Starting January 1, 2024, investors can use this facility to trade in the stock market. It involves blocking a certain amount of funds for trading, ensuring that the investor has sufficient funds available. This helps streamline and secure the trading process, making it more efficient and in line with regulatory standards.

The launch of ‘UPI for Secondary Market’ is set to commence next week in its beta phase for the equity cash segment, with the collaborative support of key stakeholders including clearing corporations, stock exchanges, depositories, stockbrokers, banks, and UPI app providers. Initially, this functionality will be available for a limited set of pilot customers.

During this pilot, investors can block funds in their bank accounts, which will only be debited by the Clearing Corporations upon trade confirmation during settlement.

Clearing corporations will directly process payouts to these clients on a T+1 basis. This Beta launch is facilitated by Groww as the brokerage app, alongside BHIM, Groww, and YES PAY NEXT as UPI apps. Initially, HDFC Bank and ICICI Bank customers will be able to avail of this facility. Further, HDFC Bank, HSBC, ICICI Bank, and Yes Bank are acting as sponsor banks for the clearing corporation and exchanges.

Other stakeholders, including stockbrokers such as Zerodha, customer banks like Axis Bank and Yes Bank, and UPI-enabled apps like Paytm and PhonePe, are in the certification stage and set to participate in the beta launch soon.

NPCI is focused on making progress in retail payment systems using technology and is working to transform India into a digital economy