SEBI to Mandate UPI for Public Debt Bids Up to ₹5 Lakh Starting November 1

The Securities and Exchange Board of India (SEBI) has announced new regulations set to take effect on November 1, aimed at streamlining the process of applying for public debt securities. This initiative reflects SEBI's commitment to enhance the efficiency of the application process and align it with the established protocols for public offerings of equity shares and convertible securities.

Mandatory UPI for Retail Investors

Under the new regulations, individual investors who are applying through intermediaries for amounts up to ₹5 lakh will now be required to utilize the Unified Payments Interface (UPI) for blocking funds. This move is designed to facilitate smoother transactions and enhance the overall user experience in the debt market.

The updated rules stipulate that retail investors must provide their UPI ID, which should be linked to their bank account, in the bid-cum-application form submitted to the respective intermediaries. This requirement is aimed at ensuring a seamless and efficient application process for public debt securities.

Enhancing Efficiency for Issuers

In addition to improving the investor experience, SEBI's new regulations also focus on expediting the process for issuers to access funds. One significant change involves reducing the minimum subscription period for public issues of debt securities. Previously set at three working days, this period has now been shortened to just two working days. This change aims to help issuers gain quicker access to the funds raised through these securities.

Furthermore, in instances where there are price band or yield revisions, the bidding period can now be extended by only one working day instead of the previous three. This adjustment is intended to streamline the process and reduce delays for both issuers and investors.

Streamlining Draft Offer Document Review

For issuers with securities that are already listed, SEBI has also amended the rules regarding the review period for draft offer documents. The time allowed for public comments has been reduced to one day, expediting the overall process of launching public issues. For other issuers, the review period has been cut down to five days, further enhancing efficiency.

These changes are expected to make the public debt market more accessible and attractive to investors, thereby fostering greater participation in this segment of the financial markets.

Impact on Retail Investor Participation

The mandatory adoption of UPI for bids up to ₹5 lakh is anticipated to simplify the investment process, potentially drawing a larger number of retail investors into the debt market. Makarand M Joshi, the Founder of MMJC and Associates, a corporate compliance firm, emphasized that this regulation could ease the overall process for individual investors.

He highlighted the timing of this regulation, noting that it coincides with a surge in UPI transactions, which have reportedly reached ₹1,669 lakh crore according to data from the Ministry of Finance. This trend indicates a growing acceptance of digital payment methods among the Indian populace, which aligns well with SEBI's objective of modernizing the public debt issuance process.

SEBI’s Ongoing Efforts to Enhance the Debt Market

SEBI has been actively working to make the debt market more appealing to a broader range of investors. By implementing these new regulations, SEBI is not only simplifying the investment process but also promoting transparency and efficiency within the public debt segment.

The introduction of UPI as a mandatory payment method is expected to boost investor confidence and encourage participation in the debt market, which has traditionally seen lower engagement from retail investors compared to equity markets.

Conclusion

In conclusion, SEBI's new rules set to come into effect on November 1 represent a significant step towards modernizing the public debt issuance process. By mandating UPI for retail investors and streamlining the overall application and review processes for issuers, SEBI is positioning the debt market for greater accessibility and efficiency.

These changes are likely to attract more retail investors, contributing to the growth and dynamism of the Indian debt market. As the financial landscape continues to evolve, initiatives like these are essential for fostering a more inclusive and efficient investment environment.