SEBI New Rule: The Securities and Exchange Board of India (SEBI) has introduced a new proposal to protect investors from fraud and unregistered entities, as detailed in a consultation paper released on 31st January. This proposal has two primary objectives: first, to help investors ensure they are sending money only to registered and regulated entities, and second, to increase the daily UPI transaction limit for capital market dealings from ₹2 lahks to ₹5 lakh. This article explains the rationale behind these proposals, their implementation mechanisms, and their potential impact on investors and the market in simple terms.
Special UPI IDs to Curb Unregistered Entities
According to SEBI, several unregistered influencers and companies have misled investors into raising funds illegally in recent years. Most of these entities are neither registered with SEBI nor linked to any regulated bank or financial institution. This makes it difficult for investors to identify whom they are sending money to. To address this issue, SEBI has proposed a special UPI ID system.
Under this new system, every registered intermediary (e.g., brokers, and mutual fund houses) will have a unique UPI ID format. The ID will be divided into two parts: the first part will include a username along with a segment identifier (e.g., “.bkr” for brokerage or “.mf” for mutual funds), and the second part will contain the bank name and a unique identifier like “payright.” For example, a broker linked to HDFC Bank might have a UPI ID like “abc.bkr@payrighthdfc,” while a mutual fund platform could have an ID like “xyz.mf@payrighticici.” This way, investors can instantly recognize the type of entity they are transacting with and whether it is SEBI-registered.
Rationale Behind Increasing the UPI Transaction Limit
SEBI has also proposed raising the daily UPI transaction limit for capital market dealings (e.g., stock purchases, mutual fund investments) from ₹2 lakh to ₹5 lakh. The primary reasons behind this decision are the growing demand for digital payments in the market and the need to accommodate larger investors.
SEBI’s data reveals that 92.9% of UPI transactions are below ₹1 lakh, while transactions between ₹2-3 lakh account for just 1.3%. However, the existing ₹2 lakh limit often inconveniences investors needing to transfer larger amounts. The proposed ₹5 lakh limit will provide flexibility to big-ticket investors while promoting digital payments and smoother cash flow in the market. Notably, this increased limit applies only to capital market transactions (e.g., buying shares or investing in mutual funds). The standard UPI payment limit (e.g., for bills or online shopping) remains unchanged at ₹1 lakh per transaction.
SEBI’s Broader Vision
The overarching goal of these proposals is to create a safer and more transparent environment for investors. The special UPI ID system will reduce fraud by ensuring investors transact only with legitimate entities. Simultaneously, the higher transaction limit will encourage larger investments, boosting economic growth. Additionally, this move aligns with newer systems like T+1 settlement (transactions settled the next day), enhancing the speed and efficiency of market operations.
Read this also: SEBI Launches iSPOT Portal: Revolutionizing Transparency in India’s Stock Market – Everything You Need to Know
Conclusion
SEBI’s proposals mark a significant step toward strengthening investor protection and market efficiency. The special UPI ID system will empower investors to avoid unregistered entities, while the increased transaction limit offers greater flexibility to large investors. These changes are expected to reduce fraud and position India’s capital market as more competitive globally. The next crucial phase will be finalizing these proposals after incorporating public feedback and stakeholder responses. This initiative could prove pivotal in shaping a digital-first, secure, and transparent future for investing in India.
