The Securities and Exchange Board of India (SEBI) has proposed a significant enhancement to the UPI (Unified Payments Interface) payment system for capital market transactions. This move aims to strengthen investor security, reduce fraudulent activities, and improve payment transparency by ensuring that funds are directed only to legitimate, SEBI-registered market intermediaries.
The proposal introduces multiple security features, including unique UPI IDs for registered intermediaries, a verification icon for payment authentication, and an increased daily UPI transaction limit of ₹5 lakh. The changes seek to create a secure and streamlined environment for investors engaging in stock trading, mutual fund investments, and other financial activities within the capital markets.
Key Features of the Proposed UPI Mechanism
SEBI plans to assign each registered market intermediary a unique alphanumeric UPI ID. This identifier will help investors verify the authenticity of intermediaries before making payments. It serves as a critical layer of protection against fraud, as unregistered entities often mislead investors and collect funds unlawfully.
Verification Icon for Payment Authenticity
To further enhance security, SEBI proposes a distinct verification icon—a “thumbs-up” symbol within a green triangle—that will appear when payments are made to verified intermediaries. This visual indicator will assure investors that their funds are being directed to legitimate entities.
If this verification icon is missing, investors will be alerted that the intermediary may not be registered with SEBI, signaling potential fraud.
Increased Daily UPI Transaction Limit
To facilitate higher-value transactions securely, SEBI proposes raising the current UPI transaction limit from ₹2 lakh to ₹5 lakh per day. This change will be implemented in collaboration with the National Payments Corporation of India (NPCI), which operates the UPI framework.
The increased transaction limit will be particularly beneficial for investors making large-scale investments in stock trading, mutual funds, and other financial instruments. SEBI has indicated that the limit will be reviewed periodically to ensure it continues to meet market demands.
Addressing Rising Fraud in Capital Markets
Since 2019, when SEBI permitted UPI payments in the securities market, the number of fraudulent activities involving unregistered entities has grown. These entities often impersonate legitimate market intermediaries, collecting funds from unsuspecting investors under false pretenses.
SEBI’s proposed secure UPI payment framework is a response to these increasing risks. By introducing unique UPI IDs and a verification system, SEBI aims to minimize fraud and foster greater trust in digital transactions within the capital markets.
How Will These Changes Benefit Investors?
- Enhanced Security:
The unique UPI ID and verification icon will help investors confidently identify legitimate intermediaries and avoid fraudulent transactions. - Higher Transaction Limits:
The increased UPI limit of ₹5 lakh per day will enable smoother and safer high-value transactions, reducing the need for traditional payment methods that may involve longer processing times. - Greater Transparency:
By directing payments solely to registered market intermediaries, SEBI’s framework will promote transparency and accountability in financial transactions. - Reduced Fraud:
The mechanism will act as a deterrent against unregistered entities attempting to deceive investors.
Public Consultation and Stakeholder Involvement
To ensure a well-rounded and effective implementation, SEBI has invited public comments on the proposal until February 21, 2025. This consultation period allows stakeholders, including investors, market intermediaries, and industry experts, to share their feedback and suggestions.
By seeking public input, SEBI aims to develop a payment mechanism that aligns with the needs of the capital markets while safeguarding investor interests.
Conclusion
SEBI’s proposal for a secure UPI payment mechanism underscores its commitment to strengthening investor protection and enhancing market transparency. The introduction of unique UPI IDs, verification icons, and higher transaction limits marks a significant step forward in creating a safe and efficient payment ecosystem for capital market transactions.
As SEBI works to finalize the framework, collaboration with stakeholders and adherence to robust security measures will be crucial in building a trusted digital financial environment.