SEBI Unveils ‘Valid’: UPI Fraud Buster for Safer Market Deals

After considering industry input from consultations and evaluating market participants' preparedness, regulator SEBI announced the "Valid" mechanism on June 11, which will give market intermediaries a unique Unified Payments Interface (UPI) address to collect money from clients.

According to Tuhin Kanta Pandey, Chairman of SEBI, the innovative UPI payment system will launch on October 1, 2025. According to Pandey, by offering a validated and secure payment channel, this novel mechanism is expected to greatly increase the security and accessibility of financial transactions inside the securities market.

Market intermediaries can use SEBI's special and secure investor payment system, called "Valid", to collect money from customers for payments to brokers, mutual funds, research analysts, investment advisers, and other parties.

SEBI Issuing Circular Asking Intermediaries to Promote Valid Among Their Investors

The SEBI has released a circular on the subject, stating that although investors will not be required to use this structured UPI method, intermediaries must acquire and provide their investors with this structured UPI address.

Furthermore, it is recommended and encouraged for intermediaries to actively support and facilitate their investors' adoption of this technique. Banks only issue "Valid", a distinct payment ID based on the Unified Payments Interface (UPI), to organisations that are registered with SEBI. To make it easier for investors to identify the regulated entities, their UPI IDs will contain the handle name "@valid" along with the bank name.

To demonstrate the authenticity of the transaction, a triangle with a green thumbs-up emblem will also be highlighted. For instance, the handle would be abc.brk@validhdfc if it was for a broker named ABC and funds were to be collected using HDFC Bank's UPI platform. Likewise, it will be abc.mf@validhdfc for a mutual fund.

After consulting with banks, the National Payments Corporation of India (NPCI), and market participants such as brokers, the regulator created the "Valid" payment mechanism. The system protects investors from scammers and guarantees that they only pay to legitimate SEBI-registered businesses.

Because there won't be any fraud, both registered entities and investors will benefit. Intermediaries will be paid more quickly, and investors will know they are paying a legitimately regulated company. For capital market transactions conducted using UPI, the market regulator has set a daily cap of Rs 5 lakh, which may be periodically reviewed in cooperation with the NPCI.

 In 2019, the Unified Payments Interface (UPI) was first made available to the public as a payment method by SEBI. Because of UPI's effectiveness and great track record, it has been incorporated into numerous other procedures.

Move will Curb Unregistered Entities

In its consultation paper, the regulator said that numerous unregistered businesses had deceived investors over the years by collecting money without authorisation, most of which was then syphoned off for their own personal benefit.

In order to allow investors to find a SEBI-registered intermediary and make the necessary payments to them in a more practical, effective, and lawful manner, it felt the need to aggressively limit the growth of unregistered firms.

In an effort to further empower investors, SEBI also unveiled the "SEBI Check" tool. "SEBI Check" is a new feature that SEBI is creating. With the use of this new technology, investors will be able to confirm the bank details, including the IFSC and bank account number of a registered intermediary, and validate the authenticity of UPI IDs by manually entering the UPI ID or scanning a QR code.

 It is anticipated that this new system will provide important advantages such as improved investor protection, an additional layer of security, and the ability for investors to confirm an entity's legitimacy prior to making any financial transactions.