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UPI for IPO Application (UPI Payment Option) Explained

Published on Friday, January 4, 2019 by Chittorgarh.com Team | Modified on Tuesday, February 12, 2019

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UPI for IPO Application (UPI Payment Option) Explained

UPI means Unified Payments Interface. It is an instant payment system on the mobile platform. It offers inter-bank transfers between any two persons' bank accounts i.e. sending or receiving money in real-time among banks in India. In addition, UPI also allows blocking money for special purposes like IPO applications.

The National Payments Corporation of India developed UPI. It is regulated by the RBI.

In late 2018, SEBI permitted UPI as an alternative payment option for retail investors (Up to Rs 2 Lacs) to invest in IPO.

How UPI will help the IPO Process?

  • To bring down the time it takes from issue closure to the listing to 3 working days.
  • Like ASBA process, the money will remain blocked in the bank account until the allotment.
  • Investors can apply in IPO online through any broker (including discount brokers).
  • No limitation to apply IPO online only through few banks i.e. ICICI, SBI or HDFC.
  • Reduce the need for manual intervention at various stages in the IPO process.
  • Increase efficiency by streamlining the amount locking.

UPI IPO Application Process flow

For Investor:

  1. Create the UPI ID at the bank
  2. Enter the bid details in the online IPO application form
  3. Enter UPI ID and submit the form
  4. In background:

  5. The stock broker upload bid details to the stock exchange.
  6. The stock exchange validates PAN and Demat account details of the investor with NSDL/CDSL.
  7. Post validation, the stock exchange share the bid details along with investors UPI ID to the designated IPO merchant banker (sponsor bank).
  8. The sponsor bank requests the investor to authorize blocking of funds through UPI app.
  9. Investors receive notification on UPI App as well as email linked to UPI ID
  10. For Investor:

  11. Investor to confirm UPI request to block funds.
  12. On finalization of basis of allotment, the funds are withdrawn from the bank account and the remaining amount is unblocked.

Implement Stages (UPI Payment for IPO Application)

UPI payment option for IPO application will be implemented in phase as mentioned below:

  • Phase I:

    From January 2019, the UPI is optional for Retail & Shareholder Category Investors. It will work along with the existing ASBA process. The listing of IPO shares will take 6 working days from the date of closure of the IPO.

  • Phase II:

    From March 2019 or after 5 mainboard IPO, the UPI will be mandatory for Retail & Shareholder Category Investors. The listing of IPO shares will still take 6 working days from the date of closure of the IPO.

  • Phase III:

    UPI to be mandatory for Retail & Shareholder Category Investors with up to Rs 2 Lacs for all IPO applications. The listing of IPO shares will reduce to 3 working days from the issue close date.

Note:

  • The UPI payment option is only for Retail & Shareholder Category Investors (Up to Rs 2 Lacs)
  • IPO application payment through UPI will be available for all equity IPO from Jan 1st, 2019.

IPO UPI Application Process Detail (Step by Step Guide)

  1. Investor submits the form to broker with demat account detail, bid detail and UPI ID.
  2. Broker accepts the form and provides an acknowledgment to the investor.
  3. Broker uploads the application on Exchange.
  4. Exchange to validate investors demat account details with Depository (CDSL or NSDL).
  5. In case of a mismatch, the exchange provides mismatch details to the broker
  6. Broker to modify mismatches PAN or DP Details
  7. Exchange to provide UPI details to Sponsor Bank.
  8. Sponsor Bank provides status Accepted / Decline / Pending (Fund Blocking Details) to Exchange.
  9. Investor authorizes Blocking of Funds through Mobile UPI APP, equivalent to application amount.
  10. IPO registrar (i.e. Karvy, Link Intime) receives final bid book from Exchange.
  11. IPO registrar finalize basis of allotment (T+1 to T+2 )
  12. Sponsor Bank unblocks funds for non-allotted shares. (T+4 )
  13. Depositories credit shares (T+4/5 )
  14. IPO lists on stock exchanges (T+6)
UPI IPO Application Process Flow Diagram

FAQ's

  1. How many applications we can bid for an IPO through UPI from one account (according to the new rule of SEBI)?

    As per the SEBI Circular - Revised IPO rules for UPI, page 6 says:

    In order to ensure parity across the various channels for submitted applications, it has been decided that an investor making application using any of the aforesaid channel, shall use only his / her own bank account or only his / her own bank account linked UPI ID to make an application in public issues.

    It means once the UPI is fully implemented only 1 IPO application will be allowed per bank account. Also, the bank account should belong to the same person who is applying for IPO. This is unlike earlier where banks like SBI use to allow 5 application from one bank account, the new rule will allow only 1 application per bank account in an IPO.

    This new rule will put a lot of hardship to Minor Account where online transaction banking is not allowed by most of the banks. It will also make it difficult for investors who apply for 1 application on each family member's name using the same bank account to increase the chance of allotment in an IPO.

    Discuss this question

  2. Will the net banking based ASBA process for IPO completely stop after UPI phase 1?

    Yes, from March 31st, 2019 you would not be able to apply in IPO using ASBA (net banking).

    In case we don't see 5 mainboard IPO's from Jan 1st till March 31st, 2019, the mandatory UPI payment will be applicable only for 6th IPO onwards, irrespective to its date.

    Discuss this question

  3. How does UPI help me?

    UPI is an online fund transfer/payment method similar to NEFT, RTGS or IMPS.

    Every time you send or receive money online (using to NEFT, RTGS or IMPS), you have to share the bank account information i.e. Bank Name, Account Number, IFSC code etc.

    With UPI, sharing the bank account detail is not required.

    Using UPI you could create a unique ID for a bank account. This ID is called Virtual Payment Address (VPA). It's like a personalized email address which you share with anyone whom you would like to transact online. No need to share bank account details with UPI.

    Example of VPA: rajivsingh916@icici

    This unique code is linked with one of the bank accounts in the background. You have to share only VPA for transfer and not the whole bank account detail.

    VPA is unique for each account. If you have 5 bank accounts on your name in the bank, you have to create 1 UPA for each account.

    Discuss this question

  4. What is VPA (UPI PIN, UPI ID or UPI Code)?

    The Virtual Payment Address or VPA is the most important concept of UPI. It is also known as UPI PIN, UPI Code or UPI ID.

    VPA is a unique ID which you create for your bank account. This unique ID can be used for online money transfer across the banks in India similar to IMPS, NEFT, RTGS etc.

    UPI VPA look like 'rajivsingh916@icici'.

    If someone wants to transfer money to you, you just have to provide this ID. No need to provide the bank account number, IFSC code, name etc.

    Discuss this question

  5. How do I open UPI Account? How do I register to UPI?

    Each banks mobile banking application has UPI as a payment option. Simply log in to mobile banking app and create a new VPA for your account with a choice of your words. That's it. It is as simple as creating an email address.

    Discuss this question

  6. How to use UPI with ICICI Bank?

    For ICICI Bank customers, UPI is available in its iMobile App which offers mobile banking.

    Steps to setup UPI in ICICI Bank:

    1. Login to ICICI iMobile banking app.
    2. Click on 'BHIM UPI' box.
    3. Click on 'Manage' button.
    4. Click on 'Create Virtual Payment Option'.
    5. Select account number you want to link.
    6. Enter your choice of words for a unique ID. Check availability.
    7. Get the confirmation. That's it.

    One the UPI ID created for the bank account, you can use it for any UPI online fund transfer or payments.

    Other banks including HDFC, Kotak and SBI have similar steps to follows.

    Discuss this question

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User Comment

avatar
3. Anil Singhavi  Friday, January 4, 2019 Reply
Self Certified Syndicate Banks eligible as Issuer Banks for UPI
1      Allahabad Bank
2      Andhra Bank
3      HDFC BANK
4      ICICI Bank
5      Karur Vysya Bank Limited
6      Punjab & Sind Bank
7      UCO Bank
8      Yes Bank
avatar
2. Johny  Friday, January 4, 2019 Reply
Top Contributor Top Contributor (200+ Posts, 200+ Likes)
Dear Admin will netbanking based online ASBA be stopped after Phase 2?
avatar
2.3. Team Chittorgarh.com  Friday, January 4, 2019
The IPO applications will remain 100% online even after UPI. The while idea is UPI is to reduce the listing time.

1. The banks will change their software to support UPI as payment method. The banks like SBI or Kotak will not be able to offer upto 5 IPO applications per bank account.

2. Now any broker (including discount stock brokers like Zerodha) can build their own online IPO application.Soon every broker in India will offer online IPO using UPI api. They will simply request UPI to block the amount and send the confirmation detail to exchange (BSE, NSE) along with IPO application.

Hope this clarifies your doubts.

We have also added few more FAQ's on top.
avatar
2.4. Puneet Agnihotri  Friday, January 4, 2019
Very nice article. Understood the entire bidding process through UPI at a glimpse.

However, in my view the online bidding channel i.e. Bidding through net banking based online ASBA will not be stopped in any phase and will be available for bidding. As pursuant to the SEBI circular SEBI/HO/CFD/DIL2/CIR/P/2018/138, channel bidding wherein Bidding of bid cum application form is being done by any Intermediary and then the forms are being forwarded to SCSBs for blocking of fund are to be stopped from phase II onward.
avatar
1. Rajat Jindal  Friday, January 4, 2019 Reply
@Admin Only 1 application against one UPI will be a huge setback for those retail investors who apply on different pan cards of family. Is there any possibility that this rule would be done away with?
avatar
4.1. Team Chittorgarh.com  Friday, January 4, 2019
Yes, that's true.

Broker association is in discussion with SEBI to reconsider this limitation.

We don't expect any change in the policy from SEBI in near future. The only way we see SEBI may reconsidering this is when few IPO fail because of low subscription.

This ruling will also affect grey market activities as the number of applications will reduce. Many people who apply in multiple accounts usually sell them in the grey market.

It will also affect the small issues (mainly SME) where the promoters and the lead manager manages to get local support to apply in IPO. They ask their known once to apply through multiple applications in the promise to adjust the profit/loss in cash or through other favors. Its illegal practice but many SME IPO's uses it to sail through the IPO process.



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