SEBI to Review Broker Pleas on RBI's UPI Norms
India's securities regulator, SEBI, is set to examine requests from brokers for relief from new Reserve Bank of India (RBI) norms affecting UPI-based settlements. The review signals ongoing regulatory tightening around UPI transaction flows and compliance, which could have broader implications for all platforms using the payment system.
- The broker pleas center on recent draft RBI guidelines that would prohibit banks from providing funding for proprietary trading and mandate 100% collateral for other types of funding extended to brokers. - Industry bodies, including the Association of National Exchanges Members of India (ANMI), have formally approached SEBI seeking a deferment of these norms, which are currently set to be implemented on April 1. - Key concerns raised by brokers involve operational challenges with bank guarantees and the increased collateral requirements for proprietary trading activities. - Analysts predict the proposed regulations could cause a 15-20% reduction in derivatives trading volumes, significantly impacting brokerage revenues as proprietary trading accounts for up to 40% of futures and options volumes. - The RBI's move is viewed as an effort to mitigate risks associated with the rapid expansion of the equity derivatives market, where a SEBI study found that nearly 90% of individual traders lose money. - This review occurs as SEBI is separately implementing a mandate for all registered intermediaries to use standardized and validated UPI IDs for collecting payments from investors, a rule that becomes effective October 1, 2025, to improve security. - Market experts have expressed concern that the funding restrictions could force smaller brokerage firms to cease operations and may incentivize larger, foreign trading firms to move their operations offshore to access cheaper financing.
