Key Points
Under the proposed settlement mechanism for stock trades, investors' funds will effectively leave their bank accounts only after trades are completed..
At present, brokers coordinate payments between the clearing corporation and investors in the stock market settlement process..
Sebi has proposed that the Unified Payments Interface (UPI) mandate service of a single block and multiple debits can be integrated with the secondary market to provide a blocking mechanism, whereby the clients will be able to block funds in their bank account for trading in the secondary market, instead of transferring them upfront to the broker..
The funds will remain in the account of a client but will be blocked in favour of the clearing corporation till the expiry date of the block mandate or till the block is released by the clearing corporation, whichever is earlier..
Clearing corporations can deduct funds from the client's bank accounts, limited to the amount specified in the block..
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