HDFC Bank has embarked on a strategic initiative by integrating transactions through the National Payment Corporation of India’s (NPCI) UPI payments app into its services, marking the implementation of the ‘UPI for secondary market’ facility. This move, officially announced by the bank, comes in response to the recent approval from the Securities and Exchange Board of India (SEBI), aligning with evolving market dynamics.
The regulatory change, effective from January 1, initiated by SEBI and the stock exchanges, introduces a transformative shift by allowing trading in the cash segment through a block mechanism on an optional basis. This mechanism mirrors the Application Supported by Blocked Amount (ASBA) system commonly used in primary markets. Under this framework, investors maintain their funds in savings accounts, with the required funds being blocked instead of necessitating an upfront transfer to the broker’s account for trade placement.
On December 29, the NPCI had previously announced the impending launch of the ‘UPI for secondary market’ facility, scheduled to debut on January 1 in the Beta phase, specifically targeting the equity cash segment. This launch received substantial support from key stakeholders, including clearing corporations, stock exchanges, depositories, stockbrokers, banks, and UPI app providers.
During the initial phase, a select group of pilot customers will have access to the facility, as announced by the NPCI. Investors participating in this trial period can block funds in their bank accounts, with the funds only being debited by clearing corporations after trade confirmation during the settlement period.
The NPCI’s statement outlined that clearing corporations would facilitate payouts directly to these clients on a T+1 basis. The pioneering launch, operating in the Beta phase, is being led by brokerage firm Groww, in collaboration with BHIM and Yes Pay Next serving as the primary UPI apps.
Initially, customers of HDFC Bank and ICICI Bank will be the beneficiaries of this groundbreaking facility. HDFC Bank, HSBC, ICICI Bank, and YES Bank have assumed the role of sponsor banks for the clearing corporation and exchanges, adding significant support to the initiative. Other crucial stakeholders involved in this move include Zerodha, Axis Bank, and YES Bank. Concurrently, UPI-enabled apps such as Paytm and PhonePe are currently undergoing the certification phase in preparation for their participation in the upcoming Beta launch.
The integration of UPI payments in the secondary market is poised to enhance the efficiency and flexibility of transactions, offering investors a seamless and secure way to engage in stock trading. The move is a testament to the financial industry’s adaptability to technological advancements and regulatory changes, promoting a more streamlined and investor-friendly approach to trading in the stock market.
As HDFC Bank spearheads the adoption of UPI payments in the secondary market, this initiative is likely to set a precedent for other financial institutions to explore innovative solutions and further integrate digital platforms into their services. The Beta launch, supported by key industry players, is expected to provide valuable insights and pave the way for the broader adoption of UPI payments in stock trading, contributing to the ongoing evolution of India’s financial landscape.