
HDFC Bank has successfully conducted transactions using the National Payments Corporation of India’s (NPCI) UPI payments app, marking the commencement of the ‘UPI for secondary market’ facility. The move, initiated on Monday, aligns with the recent approval by the Securities and Exchange Board of India (SEBI) for this UPI-based feature.
What is secondary market?
The secondary market in India, also known as the stock market or securities market, is a financial marketplace where existing or previously issued financial instruments, such as stocks, bonds, and other securities, are bought and sold among investors. Unlike the primary market, where new securities are initially offered to the public through an initial public offering (IPO), the secondary market facilitates the trading of already issued securities between investors.
SEBI Approval and Block Mechanism Implementation:
Effective January 1, SEBI and stock exchanges have permitted trading in the cash segment through a block mechanism, providing an optional alternative for the secondary market. Similar to the Application Supported by Blocked Amount (ASBA) in primary markets, this mechanism ensures investors’ funds remain in their savings accounts. Instead of upfront transfers to the broker’s account, the required funds are blocked until the trade confirmation.
NPCI Announcement and Beta Phase Launch:
On December 29, NPCI announced the initiation of the ‘UPI for secondary market’ facility, set to go live from January 1 in the Beta phase for the equity cash segment. Key participants include clearing corporations, stock exchanges, depositories, stockbrokers, banks, and UPI app providers.
Pilot Stage and Initial Customer Availability:
The initial phase of the facility is limited to a set of pilot customers, allowing investors to block funds in their bank accounts. Clearing corporations will debit these funds only after trade confirmation during the settlement period. HDFC Bank and ICICI Bank customers will initially benefit from this feature.
Sponsor Banks and Beta Launch Facilitators:
HDFC Bank, HSBC, ICICI Bank, and YES Bank are serving as sponsor banks for the clearing corporation and exchanges. The Beta launch is facilitated by brokerage Groww, alongside UPI apps such as BHIM and Yes Pay Next. Other stakeholders, including stockbrokers like Zerodha and Axis Bank, along with UPI-enabled apps like Paytm and PhonePe, are currently in the certification stage and will participate in the Beta launch soon.
Conclusion:
The successful execution of transactions by HDFC Bank underlines the implementation of the UPI for the secondary market facility, a significant development in aligning digital payments with stock market transactions. The phased approach, involving pilot customers and key stakeholders, sets the stage for broader market adoption in the near future.