SEBI Proposes Secure UPI Payment Mechanism for Market Intermediaries

The Securities and Exchange Board of India (SEBI) is working on a secure Unified Payments Interface (UPI) mechanism for registered market intermediaries. This move aims to improve investor security, prevent fraudulent transactions, and ensure that payments are directed only to legitimate intermediaries. SEBI’s proposal comes as unregistered entities increasingly mislead investors and collect funds fraudulently.

How will SEBI’s proposed UPI payment mechanism improve security?

SEBI plans to introduce a unique alphanumeric UPI ID for each registered market intermediary. This ID will help investors verify the legitimacy of intermediaries before making payments. In addition, a verification icon—a “thumbs-up” symbol inside a green triangle—will appear when payments are made to verified entities. If this icon is missing, investors will know that they may be dealing with an unregistered intermediary.

This mechanism will reduce the chances of fraud by ensuring that payments are made only to SEBI-registered intermediaries. SEBI’s move aligns with its broader goal of strengthening investor protection and market transparency.

What changes will SEBI make to UPI transaction limits?

Currently, UPI transactions for capital markets are capped at ₹2 lakh per day. SEBI proposes increasing this limit to ₹5 lakh per day, allowing investors to carry out higher-value transactions securely. This increase will be implemented in collaboration with the National Payments Corporation of India (NPCI), which operates the UPI framework. The higher limit will be reviewed periodically to ensure it meets market needs.

By raising the transaction limit, SEBI aims to facilitate smoother and safer fund transfers within the securities market. This change is particularly important for high-value transactions in stock trading, mutual fund investments, and other capital market activities.

Why is SEBI introducing these changes now?

Since 2019, SEBI has permitted UPI payments in the securities market. However, fraudulent activities by unregistered entities have been rising. These entities often collect funds from investors under false pretenses. SEBI’s proposal to introduce a unique UPI ID and verification system is a response to these risks.

By implementing this secure UPI mechanism, SEBI seeks to protect investors, reduce fraud, and enhance trust in digital transactions. The regulatory body has invited public comments on the proposal until February 21, 2025, allowing stakeholders to share their views before implementation.

Summary of the news