Securities and Exchange Board of India (“SEBI”) has issued a circular dated April 5, 2022 (“April 5 Circular”), increasing the limits for applications in public offerings through the use of the Unified Payment Interface (“UPI”) mechanism from ₹ 2,00,000/- to ₹ 5,00,000/-. The revised limits are applicable for all public issues opening after May 1, 2022. The limits are in line with a recent increase in transaction limit for UPI prescribed by the National Payments Corporation of India (“NPCI”), through its circular dated December 9, 2021.
This move is being seen as one more attempt by SEBI to clear potential hurdles for the upcoming initial offer of LIC. Along with the directive to utilise four sponsor banks (in place of the previously mandated one) and the amendments to the Securities Contracts (Regulation) Rules, 1957, this move is a positive development to help ease potential issues with the large volumes of applications that the LIC public issue is being expected to generate. The April 5 Circular clarifies that NPCI “has reviewed the systemic readiness required at various intermediaries to facilitate the processing of applications with increased UPI limit and confirmed that as on March 30, 2022, more than 80% of SCSBs/Sponsor Banks/UPI Apps have conducted the system changes and have complied with the NPCI provisions.” Additionally, in the long run, this move may beneficially impact the ability of investors to receive quicker refunds through unblocking of funds and is generally a welcome move towards the smoothening of the payments processes involved in a public issue process. Given the large volumes of UPI transactions that are conducted each month (5,405.64 million transactions worth ₹ 9,60,581.66 crores were recorded in the month of March 2022 alone, systemic readiness and stress testing of the UPI mechanism in the public issue context will be vital.
Please click here to read the full article by Pracheta Bhattacharya and Arka Mookerjee, published in BW Legal.
Arka’s practice area covers primarily equity capital markets issuances which covers a wide range of products such as Initial Public Offerings, Rights Issues, Qualified Institutions Placements, Initial Public Offering of Infrastructure Trusts and foreign currency convertible bonds.