Sebi introduces verified UPI handles for market payments from 1 October

In a move aimed at strengthening payment security in the securities market, the Securities and Exchange Board of India (SEBI) has announced that from October 1, 2025, only verified UPI (Unified Payments Interface) handles will be allowed for all market-related transactions, including initial public offerings (IPOs), mutual funds, and secondary market dealings. The measure is expected to bolster investor protection, reduce fraud risks, and streamline payment verification in India’s rapidly digitizing financial landscape.

A New Security Layer in the Payment Ecosystem

SEBI’s latest directive is part of a broader initiative to integrate fintech safeguards into India’s capital markets. Under the new framework, investors will be required to use UPI IDs that have undergone bank-level verification when making payments for market transactions. This will be mandatory for all intermediaries involved — including brokers, depositories, registrars, and payment banks.

The move comes in response to concerns over fraudulent UPI transactions and unverified handles being used for siphoning funds. In recent months, SEBI received multiple complaints highlighting payment mismatches and security loopholes during IPOs and other primary market activities.

Official Statement from SEBI

In a circular issued on June 10, 2025, SEBI stated:

“In the interest of investors and to ensure a secure, efficient, and transparent payment mechanism in the capital market ecosystem, it is decided that only verified UPI handles shall be permitted for use in all market-related payment activities from October 1, 2025.”

Market intermediaries have been advised to initiate system upgrades and investor awareness campaigns well in advance to facilitate a smooth transition.

Analyst Commentary: “A Step in the Right Direction”

According to Vivek Aggarwal, Fintech Analyst at ICICI Securities:

“This is a highly welcome move. UPI has revolutionized retail payments in India, but its adoption in stock markets has lacked certain checks. Verified UPI handles will significantly mitigate the risk of fraud, especially during high-volume IPO seasons.”

Rashmi Mehta, a compliance consultant at KPMG India, added:

“The onus will now shift to UPI-enabled banks to ensure robust KYC (Know Your Customer) and handle validation protocols. It’s a win for both investors and regulators.”

Impact on Retail Investors and Market Participants

Retail Investors will have to verify their UPI handles through their respective banks and ensure they are linked to valid PAN and demat accounts. Most banking apps already provide UPI verification mechanisms, but this initiative will likely prompt them to enhance user onboarding and documentation processes.

Brokers and Intermediaries will need to integrate with UPI infrastructure capable of identifying and filtering only verified UPI IDs. This may require some technological adjustments and API integrations with NPCI (National Payments Corporation of India) systems.

Industry Response and Readiness

India’s brokerage community has expressed broad support for the initiative but also highlighted the importance of implementation clarity.

Sanket Deshmukh, CTO at Zerodha, commented:

“We’ve already begun backend testing for verified UPI-only transactions. It’s technically feasible, but investor communication will be key. Many users aren’t aware their current UPI handle may not be verified.”

The Association of Mutual Funds in India (AMFI) is reportedly coordinating with its members to update KYC processes and investor dashboards to accommodate the new norms.

Market Context: A Digital Transformation Journey

India’s capital markets have seen an exponential increase in retail participation post-pandemic, thanks to real-time payment mechanisms like UPI. As per SEBI data, UPI accounted for over ₹1.2 lakh crore worth of market payments in FY2024–25. However, the convenience came with a downside — a rising number of complaints related to failed, delayed, or fraudulent transactions.

This new UPI verification rule fits into a broader digital compliance agenda being pushed by SEBI, which also includes initiatives such as:

• Two-factor authentication for brokers

• Aadhaar-based e-KYC

• Real-time settlement pilots (T+0)

Investor Outlook: A Boost to Confidence and Transparency

The long-term outlook for investors appears positive. Verified UPI handles are expected to increase transparency and reliability, especially during IPOs, where payment failures have often led to application rejections and missed opportunities.

Investors are advised to check their UPI status with banks, update KYC details, and familiarize themselves with brokerage platforms’ upcoming changes to avoid last-minute issues.

Financial advisors see this as a sign of maturing markets. As India gears up for deeper financial inclusion, verified and secure digital infrastructure will be key to sustaining growth.

With India’s markets becoming increasingly digital, SEBI’s decision to mandate verified UPI handles from October 1, 2025, marks a milestone in investor protection and payment transparency. While challenges in implementation may arise, the broader market sentiment remains optimistic. A secure, fast, and verified payment ecosystem is not just a regulatory win — it's a foundational step for India's next phase of financial innovation.