On June 11, 2025, the Securities and Exchange Board of India (SEBI) issued a pivotal circular mandating the adoption of standardised, validated, and exclusive Unified Payments Interface (UPI) IDs by all SEBI-registered investor-facing intermediaries. This development marks a significant leap toward enhancing payment transparency and security in India’s capital markets. At the heart of this initiative lies the goal of protecting investor interests by ensuring that funds reach only verified and registered entities.
In recent years, digital payments (particularly through UPI) have surged in India’s financial ecosystem. However, with the ease of online transactions has come the heightened risk of fraud, especially misdirected payments, phishing attacks, and impersonation scams targeting unsuspecting retail investors. SEBI’s circular responds directly to these concerns by establishing a structured, traceable, and secure UPI mechanism tailored specifically for securities transactions.
Key Features :
The circular introduces a framework where intermediaries must generate exclusive UPI handles (IDs) linked with a unique identifier “@valid” followed by the bank name (e.g., abc.brk@validhdfc). These IDs are:
- Standardised using a common suffix format (e.g., brk for brokers, .mf for mutual funds).
- Validated through a regulated utility that ensures the handle matches the intermediary’s registered business identity.
- Exclusive for use in investor payments, issued only under the merchant category code 6211 to registered market participants.
Crucially, investors are encouraged (but not forced) to use these validated UPI IDs, while intermediaries are mandated to implement and promote them.
Enhancing Investor Fund Security :
The introduction of validated UPI IDs offers several robust mechanisms that fortify investor protection:
🔸 Authentication of Intermediaries
Each UPI ID is verified through a utility developed by SEBI and NPCI and allocated only after matching the intermediary’s official records. This ensures that when investors transfer funds using a validated handle, they are interacting with a genuine, registered market participant.
🔸 Visual Assurance through Iconography
SEBI has mandated that all validated UPI handles display a white thumbs-up inside a green triangle icon, signalling the legitimacy of the intermediary on UPI apps. The absence of this icon serves as a red flag, alerting investors to the risk of fraud.
🔸 SEBI ‘Check’ Verification Tool
To further protect investors, SEBI is developing a “SEBI Check” tool, allowing users to verify a UPI ID or scan a QR code to confirm the legitimacy of the intermediary’s payment account. This verification will include bank details like account number and IFSC, offering complete transparency before any transaction is made.
🔸 Restricted Use and Traceability
The exclusive nature of these UPI handles prevents intermediaries from using them for non-securities related activities, making every transaction sector-specific and traceable. This ensures clear audit trails and regulatory oversight, minimizing misuse.
🔸 Transaction Limits for Risk Containment
SEBI retains the existing upper transaction limits of ₹2–5 lakhs per day, as set by NPCI for capital market transactions. These thresholds help mitigate the risk of large-scale fraud through single or bulk unauthorized transactions.
Implementation Timeline and Stakeholder Responsibilities :
The circular provides a clear, phased implementation schedule leading up to October 1, 2025, when the new UPI framework will become effective for investors. Some of the key responsibilities include:
- Intermediaries must update their contact details in the SI Portal, obtain new UPI IDs from banks using the SEBI-provided utility, and generate corresponding QR codes. They are also obligated to inform investors through multiple channels such as email, SMS, websites, and social media about the new UPI mechanism and conduct investor awareness campaigns. Educational materials, FAQs, and example templates are also required to be made available online.
- Self-Certified Syndicate Banks are tasked with allocating UPI handles and verifying intermediary credentials.
- Market Infrastructure Institutions (MIIs) and Registrars/Transfer Agents (RTAs) must integrate the new UPI interface and assist in education and awareness initiatives.
Optional for Investors, Mandatory for Intermediaries- It’s noteworthy that while investors are not forced to adopt the new UPI method, if they choose to use UPI, they must transact only via the validated IDs. This preserves investor freedom while simultaneously encouraging safer payment habits.
Conclusion
SEBI’s initiative to mandate structured and validated UPI IDs for payment collection by intermediaries represents a major leap toward securing India’s capital market payment infrastructure. It reinforces trust, enhances user experience, and significantly mitigates the risk of fraud in digital transactions. This initiative aligns with SEBI’s broader regulatory goals under Section 11(1) of the SEBI Act, 1992, which empowers the regulator to take actions necessary to protect investors and regulate the securities market. By cleaning up the digital payments layer, SEBI is strengthening trust in Indian capital markets and paving the way for higher retail participation and safer transactions.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
