In this age of digitalisation, instant transfers and payments have become the norm. Today, we have the convenience of transferring funds from anywhere and at any time using just our mobile phones and an UPI ID. Now we can even apply for an IPO through our United Payments Interface.
Since UPI is an instant payment system that integrates certain banking features, merchant payments, and smooth fund transfers 24/7, it allows the instant transfer of funds between two parties’ bank accounts, so that applying for an IPO is easier.
Subscribing to an IPO
Before the opening of an IPO, details of the subscription such as the opening and closing dates, and price bands are announced. To subscribe, you have to apply for a definite number of lots, each of which will have several shares.
Previously, you had to apply for an IPO using the Application Supported by Blocked Amount (ASBA) system, which allowed online and offline applications.
However, to make the process of IPO subscription even easier, the Securities and Exchange Board of India (SEBI) has allowed UPI to be used for subscribing to IPOs.
How to apply for IPOs using UPI?
Here is a step by step process for the same:
- If you do not already have an UPI ID, download any virtual payments mobile application that is UPI enabled and install the same.
- Create an UPI ID as well as a Mobile Personal Identification Number (MPIN) for accessing the bank account that is linked to your Demat and trading account. This is a four digit PIN that must be used to transfer funds through UPI. This unique personal identification number is chosen by the account holder.
- Next, login to your mobile application for stock trading and use the navigation menu to go to the IPO page.
- Select the IPO of your choice and go through all the details thoroughly; check the opening and closing dates, size of each lot and read the Draft Red Herring Prospectus (DRHP).
- Type in your UPI ID details on the IPO application form. It should be the UPI ID that is linked to your trading and Demat account.
- State how many lots you would like to bid for.
- To subscribe for the cut-off price, click the checkbox given with the cut-off price.
- To subscribe at an alternate price, enter the same in the given space.
Submit the form after reading the agreement.
Once your bank approves of the mandate, funds that equal the number of applied lots for which you have subscribed, will be reserved in your savings bank account.
- If and when your IPO application is successful, the funds for the allotment are deducted from the linked bank account, while the shares are credited to your Demat account.
- If your application is not successful, the bank will release the blocked amount on the allotment date.
SEBI’s decision to allow UPI payment for IPO applications has drastically improved the accessibility and convenience of such public offerings. So take advantage of this benefit by using your UPI ID the next time you apply for an IPO.