Can banking regulator consider a 'check' tool for online deposit safety?

After a gap of two months, dematerialised (demat) account opening picked up in October. Three million new accounts were added that month, taking the total to 210.06 million.

 

In July, close to three million new demat accounts were added, recording the highest monthly increase since December 2024. The highest-ever monthly addition was in January 2024 – 4.68 million. 

The number of unique investors has crossed 135 million – more than three-and-a-half times of where it stood in the financial year 2019 (FY19), indicating their confidence in our markets, Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey recently said. However, despite the increasing number of unique investors, markets are still not an attractive investment avenue for many. 

A recent Sebi-led nationwide survey, covering some 90,000 households across 400 cities and 1,000 villages, highlighted this. About 63 per cent of Indian households (some 213 million families) are aware of at least one securities product, including mutual funds, shares, exchange-traded funds, and derivatives. Yet, only about 9.5 per cent of them, about 32 million families, invest in markets. 

Urban participation is significantly higher, about 15 per cent, compared with 6 per cent in rural India, illustrating the divide in financial access and approach. While unique investors have been on the rise, at least 85 per cent of Indian households still remain on the sidelines.

 

Yet another finding was that investor knowledge is still limited. Only around 36 per cent of active investors show a moderate understanding of market products and risks. This knowledge gap poses a risk, making investors vulnerable to potential losses and fraud.

 

Often, inexperienced investors dive into hot tips – relying on hearsay or online advice – without fully understanding the fundamentals or risks involved. Also, misleading ads and promises of “guaranteed return” often exploit risk-averse savers by offering a false sense of security with risky bets.

 

Driven by easy online platforms, a new wave of investors — nearly 43 per cent of whom are below 30 — rushed into trading in futures and options (F&Os). Sebi’s studies reveal that about 93 per cent of retail F&O traders between FY22 and FY24 incurred net losses (including costs). Around 11.3 million traders suffered a collective loss of Rs 1.81 trillion. In FY24, individual traders lost in all about Rs 75,000 crore in F&O trading – Rs 46,000 on an average.

 

After a series of measures by the markets regulator, the number of unique F&O retail traders dropped by mid-2025. Still, close to 91 per cent of retail participants in F&O trading reported losses in FY25.

 

The Sebi investors’ survey identified the reasons behind households staying out of the markets. The biggest barriers are complexity and fear. About 74 per cent of non-investors admitted that complexity of products and lack of knowledge deter them from putting in their money, and 73 per cent cited fear of loss for their hesitation. More than half (51 per cent) pointed to trust issues and concerns about transparency in the financial system. High transaction costs, volatile markets, and negative sentiment also hold people back.

 

At the recent Business Standard BFSI Summit, Pandey emphasised that the regulator would take strong action against misleading "finfluencers" (financial influencers). Sebi has already taken down over 100,000 misleading posts, and is continuing to remove around 5,000 every month. Only about 2 per cent of finfluencers on social media are registered with the regulator.

 

Pandey also highlighted that Sebi is improving its surveillance tools and working with platforms like Google, Meta, and X to curb the spread of harmful content.

 

Two key investor-protection tools are a testimony to this. Effective October 1, all Sebi-registered brokers, mutual funds, depositories, and other intermediaries must use "validated UPI handles" to receive investor payments. These new UPI IDs include a mandatory "@valid" suffix issued by the National Payments Corporation of India (NPCI), along with a category code (".brk" for brokers, ".mf" for mutual funds). Major brokerage firms, which handle at least 90 per cent of retail trades, and all mutual funds have already adopted these handles.

 

Importantly, when investors send money to a @valid UPI handle, they will see a green thumbs-up icon on their payment screen. This visual confirmation shows that funds are going to a legitimate, Sebi-registered entity. Each intermediary will also have a QR code featuring the same thumbs-up symbol to avoid any confusion.

 

Along with this, Sebi has introduced a "Sebi Check" tool. Through a website or mobile app, investors can now verify an intermediary's Sebi registration, bank account details, or UPI ID instantly. For instance, before transferring money, an investor can enter the broker's account number or the @valid UPI handle into Sebi Check. The tool will quickly confirm if the details match a registered intermediary. If they don’t, the investor will receive an immediate alert, helping prevent payment to fraudsters.

 

Together, the new "@valid" handles and Sebi Check create a transparent, multi-layered security system for investors making transactions.

 

At the risk of repeating myself, here are the key details:

 

# Verified handles: Only Sebi-registered intermediaries, such as brokers and mutual funds, can use the "@valid" handle. Each handle will also contain a category-specific suffix (mentioned above).

 

# Visual confirmation: When an investor makes a payment, a green triangle with a thumbs-up icon will appear on the UPI app's payment screen, confirming that the payment is going to a verified intermediary.

 

# QR code verification: Intermediaries will also provide QR codes that display the thumbs-up icon, which investors can scan to ensure payment security.

 

# The "Sebi Check" tool on its website and the Saarthi mobile app allow investors to verify the authenticity of a UPI ID or bank account details of an intermediary before making a payment.

 

# Investors can continue to use their existing UPI IDs for transactions. The new verified IDs are only required for the intermediaries.

 

# Finally, while the new rules are in effect from October 1, intermediaries have a transition period until December 2025, after which only verified handles will be permitted. 

 

The Sebi survey indicates a growing number of "aware but not yet invested" families, with at least 22 per cent planning to enter the markets in the next year. They are eager to engage with capital markets. Apart from the lack of knowledge and conservative attitude, online frauds dent the spirit. Sebi’s comprehensive response, from banning misleading influencers to launching validated payment systems and investor education programmes, will help build trust and push the tide of savers turning investors.

 

Trust is also the bedrock of the banking industry’s business. In private, most bankers admit that the biggest challenge before them is managing liabilities or deposits at this moment. It's not the quantum and the cost of funds alone. Frauds, too, are emerging as a big headache, with many depositors seeing money flowing out of their accounts without their knowledge.

 

The Reserve Bank of India has already put in place a detailed fraud risk management framework for all regulated entities. Can the banking regulator also consider introducing a special Check tool for all online deposit transactions?  The writer is an author and senior advisor to Jana Small Finance Bank Ltd. His latest book: Roller Coaster: An Affair with Banking. To read his previous columns, log on to www.bankerstrust.in   X: @TamalBandyo