SEBI Directed QSBs to Offer UPI Mechanism, 3-in-1 Trading Facility to Investors

Current Context: The Securities and Exchange Board of India (SEBI) has directed Qualified Stock Brokers (QSBs) to offer either the UPI-based block mechanism or a 3-in-1 trading account facility to their clients starting from February 1, 2025.

• Key Details:
• UPI-based Block Mechanism: This mechanism, akin to the ASBA facility, allows clients to block funds in their bank accounts for trading purposes without transferring the money upfront. This ensures that funds remain in the investor’s account until the trade is executed, reducing the risk of fund misuse.
• 3-in-1 Trading Account: This facility integrates a savings account, demat account, and trading account into a single solution. It allows clients to seamlessly manage their investments and earn interest on cash balances in their integrated savings account.
• Objectives:
• Investor Convenience: These offerings are aimed at enhancing the convenience and flexibility for investors by streamlining the trading and settlement process.
• Risk Mitigation: By keeping funds blocked in the investor’s bank account until the trade is executed, the risk of fund misuse by brokers is minimized.
• Market Efficiency: These measures are expected to improve the overall efficiency of trading operations in the stock market.

Question:

1 What is the purpose of the UPI-based block mechanism directed by SEBI?

• A) To allow immediate fund transfer to brokers
• B) To block funds in clients' bank accounts for trading without transferring them upfront
• C) To integrate trading and savings accounts
• D) To increase the transaction fees

Answer: B) The UPI-based block mechanism allows clients to block funds in their bank accounts for trading purposes without transferring the money upfront, ensuring funds remain in the investor's account until the trade is executed.