Chapter 35: Annexure – IV: Unified Payment Interface (UPI) in ASBA

The Unified Payments Interface (UPI) is a real-time, instantaneous payment system developed by the National Payments Corporation of India (NPCI) and regulated by the Reserve Bank of India. In 2018, SEBI collaborated with NPCI, stock exchanges, and banks to integrate UPI with the ASBA process for retail investors applying for public offerings (IPOs, FPOs, and Rights issues).

Structural Architecture

The UPI ASBA framework operates as an electronic bridge connecting four institutional pillars:

1. Investor's Stock Broker: Accepts the retail IPO bid details and captures the client's registered UPI ID (Virtual Payment Address - VPA).
2. Stock Exchange Bidding Platform (NSE/BSE): Validates bid information and transmits a structured mandate creation request to the NPCI switch.
3. NPCI Switch: Routes the mandate instruction to the investor's designated bank.
4. Investor's Bank (SCSB): Creates an electronic lien (hold) on the funds within the client's bank account upon receiving customer authorization via UPI MPIN.

Applying for an IPO using the UPI ASBA facility involves a streamlined digital workflow:

Step 1: Bidding on the Broker Portal

• Log in to your stock broker's web or mobile trading application.
• Select the active IPO from the primary market dashboard.
• Choose your investor category (Retail Individual Investor - RII, up to Rs. 2 Lakhs, or Non-Institutional Investor - NII, between Rs. 2 Lakhs and Rs. 5 Lakhs).
• Enter the bid quantity (in multiples of the lot size), bid price (or select 'Cut-off Price' for retail).
• Enter your valid UPI ID (e.g., username@okhdfcbank, username@axisbank) and submit the bid.

Step 2: Receiving the Mandate Request

• The exchange transmits the bid to NPCI, which triggers an automated UPI Mandate Notification to your UPI application (BHIM, Google Pay, PhonePe, Paytm, etc.).
• A notification appears on your mobile device alerting you to an incoming mandate request.

Step 3: Authorization and Lien Creation

• Open your UPI app and navigate to the 'Mandates' / 'Autopay' section.
• Carefully verify the details: Corporate Name of the Issuer, Application Number, Maximum Amount to be Blocked, and Validity End Date.
• Authorize the mandate by entering your secure 6-digit or 4-digit UPI MPIN.
• Your bank immediately blocks the specified funds. You receive an instant SMS from your bank confirming that funds have been blocked under ASBA.

The UPI ASBA framework accommodates changes and ensures timely release of funds:

Modifying or Canceling Bids

• While the IPO bidding window remains open (typically until 5:00 PM on the issue closing date), an investor can modify bid quantity, alter price, or cancel the application entirely through their broker's platform.
• If a bid is modified upward, a revised UPI mandate for the incremental amount is sent to the investor's app for re-authorization.
• If a bid is canceled, the exchange sends a de-registration message to NPCI, and the bank removes the lien immediately.

Post-Allotment Execution: Debit vs. Unblock

• Successful Allottees: On the basis of allotment date (T+1 or T+2), the bank receives a formal debit instruction from the registrar and clearing house. The exact value of shares allotted is debited, and the shares are credited to the investor's demat account.
• Unsuccessful / Partial Applicants: The bank receives an unblocking notification. The lien on unallotted funds is released immediately, and the money becomes freely available for withdrawal or transfers. If a bank fails to unblock funds on time, the investor can register a grievance with the bank's Nodal Officer or on SEBI SCORES.