Regulator to encourage paperless, cashless stock trading
Investors can no longer deposit cash in their broker’s account to trade in stocks.
On Thursday, the Securities and Exchange Board of India (SEBI) made it mandatory for stock brokers to accept client funds only by way of bank or electronic transfers such as cheques and mobile banking.
“In view of the various modes of payment through electronic means available today, it is directed that stock brokers shall not accept cash from their clients either directly or by way of cash deposit to the bank account of stock broker,” SEBI said in a circular.
The capital markets watchdog highlighted the fact that the government had promoted various means for transfer of funds through digital mode for encouraging a cashless economy and financial institutions and banks had introduced various modes of electronic payment. The new norms take effect immediately.
The move is in line with SEBI’s plans to encourage paperless and cashless stock market trading.
Incidentally, applications in an initial public offer (IPO) are now completely done through ASBA – Application Supported by Blocked Amount — a mechanism wherein the bid amount is blocked in the subscriber’s account at the time of bidding and is debited only after the allotment of shares is finalised