Invest Up To Rs 5 lakh in IPOs Through UPI As Sebi Enhances Limit

The Securities and Exchange Board of India (Sebi) has revised the upper limit for retail IPO applications via Unified Payment Interface (UPI). Now you can apply for IPOs and public offers for up to Rs 5 lakh using UPI, up from the current limit of Rs 2 lakh per application.

This enhanced limit of individual UPI-based IPO applications comes into effect from May 1, 2022, said Sebi via a notification issued on April 5.

The move follows a go-ahead by the National Payments Corporation of India (NPCI), the developer of UPI, after the completion of back tests. In a circular dated December 9, 2021, NPCI decided to increase the current maximum transaction limit per retail UPI-based IPO application from Rs 2 lakh to Rs 5 lakh.

The mechanism was implemented after a gap because banks, other payment aggregators, stock exchanges and other stakeholders had to back test the new system and had to stress test the payment software too. 

“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 per cent of SCSBs/Sponsor Banks/UPI Apps have conducted the system changes and have complied with the NPCI provisions,” read the said circular.

Click here to read more about UPI.

How To Apply For IPOs Through UPI

Before 2018, individual retail investors and others had to submit their IPO application along with the duly filled form using Application Supported by Blocked Amount (ASBA) method. The funds were blocked by the investor’s bank and transferred to the issuing company’s escrow account created specifically for IPOs. When the IPO allotment took place, the money would move from the escrow to the company’s account. Following this, the investors’ demat account was credited with shares. In case of no allotment, the money was refunded to the investors.

Sebi made UPI available in 2018 as an additional mechanism. When you apply for an IPO, the money stays blocked in your account until the allotment comes through. In the interim, this money can continue to earns savings account interest.

In case you don’t have a UPI-enabled bank account, you can still apply for an IPO using the ASBA process.

Click here to know more about how brokers are enticing investors to open a demat account for the upcoming LIC IPO.