UPI Based Block Mechanism | 07 Sep 2024

Recently, Securities and Exchange Board of India (SEBI) has proposed that Qualified Stock Brokers (QSBs) should offer a UPI based Block Mechanism for secondary market trading, similar to the Application Supported by Blocked Amount (ASBA) facility.

Clients can trade using blocked funds in their bank accounts instead of transferring the money upfront to the Trading Member (TM). It’s optional for investors and not mandatory for TMs to provide as a service.
3-in-1 Trading Accounts: SEBI proposes this as an alternative to the ASBA-like facility. The 3-in-1 accounts keep funds in the client’s bank account, earning interest, and can be used for both cash and derivatives segments.
- Unlike the UPI block, which has restrictions, the 3-in-1 facility has no limits on the amount.
- SEBI introduced the UPI block mechanism for IPOs in 2019. A beta version for secondary market trading was launched in January, 2024, limited to the cash segment.
ASBA is a mechanism introduced by the SEBI to facilitate the application and allotment process for Initial Public Offerings (IPOs), rights issues, and other securities offerings.
- It is designed to make the application process more efficient and investor-friendly by allowing investors to apply for shares without transferring the entire application amount upfront.