SEBI Mandates UPI-Based Trading or Three-in-One Accounts for Brokers by February 2025

SEBI Mandates UPI-Based Trading or Three-in-One Accounts for Brokers by February 2025

The Securities and Exchange Board of India (SEBI) has announced new requirements for qualified stock brokers (QSBs) to implement either a UPI-based block mechanism or a three-in-one trading account for their clients starting February 1, 2025. This initiative aims to enhance investor convenience and expand trading options in the secondary market.

Under the new regulations, QSBs must choose to provide either the UPI-based block mechanism or the three-in-one account facility. The UPI block mechanism is akin to the Application Supported by Blocked Amount (ASBA) system, allowing investors to block funds in their bank accounts for share purchases, which improves fund management and prevents misuse of funds. This mechanism enables clients to trade using blocked funds rather than transferring money upfront to trading members.

The three-in-one account integrates a savings account, demat account, and trading account into a single platform, providing a more streamlined solution for investors. This move is expected to empower investors by enhancing security and transparency while allowing them to earn interest on their blocked funds.

QSBs must meet specific eligibility criteria related to their size, scale of operations, and client base to qualify for this initiative. They will also face increased oversight and monitoring. While the UPI-based block mechanism is currently optional for brokers, this regulation aims to leverage the growth of UPI payments to benefit investors significantly.

Clients will have the choice to continue with existing trading facilities or opt for the new offerings. SEBI's decision underscores its commitment to improving investor experiences in the evolving market landscape.