SEBI mandates new UPI mechanism for registered intermediaries to improve safety

The Securities and Exchange Board of India (SEBI) has mandated the use of a UPI-based payment mechanism for secondary market trades to enhance investor protection. This new system, set to be implemented in two phases starting from September 2025, will ensure that funds are transferred from an investor's bank account only upon the confirmation of a trade. The money will be held in a blocked state in the investor's account, similar to how it works for IPO applications, until the trade is executed. This "block mechanism" will prevent the misuse of client funds by brokers and reduce the risk of non-payment by clients. The move is a significant step towards safeguarding investors' capital, improving transparency in the settlement process, and strengthening the overall integrity of the Indian stock market ecosystem by directly linking fund transfers to trade execution.