The Securities and Exchange Board of India (SEBI) instructed qualified stock brokers (QSBs) to provide trading facility in the secondary market using the UPI-based block mechanism to their clients. This mechanism is similar to the ASBA facility.
The capital markets regulator announced the changes in a board meeting on September 30, 2024. These new changes would be effective from February 1, 2025. The UPI block facility would basically allow investors to trade in the secondary market on the basis of funds blocked in their bank accounts, rather than transferring it upfront to the trading member.
Further, the brokers have been asked to provide a three-in-one trading account facility to investors. The account is basically a combination account that includes a savings account, demat account, and trading account.
However, SEBI noted that these facilities remain optional for investors, wherein they can also opt to continue with the current facility of transferring funds to trading members. The decision is expected to promote UPI usage by retail investors.
What is ASBA?
ASBA means Application Supported by Blocked Amount. This refers to an application submitted by an investor wherein it involves authorisation to Self-Certified Syndicate Bank (SCSB) to block funds available in the individual’s Savings bank account or Current Account. This system is used to subscribe to an issue and basically blocks the amount in the applicant’s bank account for the said issue till the allotment is finalised.
This facility is already available in the primary market and it helps make sure that an investor’s money is moved only when they receive the allotment of the issue. This decision from the capital markets regulator will help investors as they would continue to earn interest on the funds in their account till the final allotment.
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