Sebi mulls safe UPI payment mechanism for registered market intermediaries

The proposed UPI payment limit for capital market transactions is set to Rs 5 lakh per day, higher than the current Rs 2 lakh limit.

Markets regulator Sebi is looking to come out with a new mechanism to ensure secure and efficient payments in the securities market through the Unified Payments Interface (UPI) in a bid to distinguish legitimate financial intermediaries from fraudsters.

Under the proposed mechanism, the regulator has suggested creating a unique UPI address for registered market intermediaries, making it easier for investors to confirm that they are paying only registered entities.

The proposed UPI payment limit for capital market transactions is set to Rs 5 lakh per day, higher than the current Rs 2 lakh limit. This will be evaluated periodically in consultation with the National Payments Corporation of India (NPCI).

The Securities and Exchange Board of India (Sebi) floated a consultation paper on the proposals on Friday and sought public comments on them by February 21.

Since 2019, Sebi has enabled UPI as a mode of payment in the market.

However, there has been a growing issue with unregistered entities misleading investors and collecting money fraudulently.

To address this, Sebi has proposed to creating a unique alphanumeric UPI ID for each registered intermediary.

"This unique UPI address will help investors ensure that their payments are reaching only to registered intermediaries. As a corollary, this would also help investors identify, isolate and avoid unregistered entities, who will not have access to this unique UPI handle," Sebi said.

Further, a special "thumbs-up" icon inside a green triangle will appear when payments are made to verified intermediaries. If the icon is missing, it will warn investors about potential risks of paying unauthorised entities.

The costs of implementing this system are expected to be low, as the process involves collaboration between Sebi, NPCI, banks, and registered intermediaries.

This initiative is being discussed with various stakeholders, including the NPCI.

Earlier on Friday, Sebi chairperson Madhabi Puri Buch, in an event organised by ICAI, explained about the proposed "Pay Right" initiative.

This initiative will enable investors to verify the authenticity of the UPI ID they are transferring money to, through robust KYC (Know Your Customer) due diligence. This measure is designed to combat the growing threat of digital fraud, ensuring that investors can confidently confirm they are making payments to legitimate recipients.

Buch emphasised the importance of marrying technology with trust, saying that this new step would help distinguish legitimate financial intermediaries from fraudsters and reinforce investor confidence in the digital ecosystem.