How the UPI mandate works for an IPO

What a UPI mandate is

A UPI mandate is a request to block an amount in your bank account for a specific purpose. In an IPO, it lets the bank set aside your bid amount until allotment, without taking it out of your account.

This is a form of ASBA, “application supported by blocked amount”. The money stays in your account and keeps earning savings interest, but you cannot spend it until the block is released.

How it works, step by step

1. You bid in your broker’s app. You choose the IPO, the number of lots and the price or cut-off, and enter your UPI ID.
2. The exchange passes the bid on. Your broker sends the bid to the exchange, which sends a mandate request through the issue’s sponsor bank.
3. The request reaches your UPI app. It appears in the app linked to that UPI ID, under pending requests or mandates.
4. You approve it. You check the amount and the IPO name, and approve with your UPI PIN.
5. The amount is blocked. Your bank sets the bid amount aside. The exchange now shows your bid as valid.
6. After allotment. The amount for allotted shares is debited, and the rest is released by 4 pm on T+2.

The 5 pm deadline

The mandate must be approved by 5 pm on the day the issue closes. This has applied to issues opening on or after 1 September 2022.

A bid whose mandate is not approved in time is not counted, even if it shows in your broker’s order book. On the last day, requests can take longer to arrive because so many people apply at once. Applying a day early gives you time to sort out any problem.

The ₹5 lakh limit

UPI can be used for IPO bids of up to ₹5 lakh per application by individual investors. That covers every retail bid, which is capped at ₹2 lakh, and small NII bids of up to ₹5 lakh.

For a larger bid, apply through ASBA in your bank’s net banking instead. The money is still blocked rather than debited.

A worked example

Say you bid for 2 lots of 94 shares at cut-off in an IPO with a price band of ₹150 to ₹158.

These are illustrative numbers and our calculations. If you had been allotted nothing, the full ₹29,704 would have been released on T+2.

What the mandate request shows

Before you approve, read the request. It shows the amount to be blocked, the name of the IPO or the sponsor bank, and an end date for the block, usually a few days after the issue closes.

The amount should equal your lots times the shares per lot times the cap price, or the price you bid at. If it does not match what you entered in your broker’s app, do not approve it. Cancel the bid and check what went wrong.

Approving puts a one-time block on the money. It does not set up any recurring payment.

UPI or net banking: which to use

Both block your money rather than debiting it, and both are treated the same in allotment. The difference is the route.

UPI suits most individual investors. You bid in your broker’s app, approve in your UPI app, and you are done. Its limit is ₹5 lakh per application.

Net banking ASBA suits larger bids and anyone who prefers to apply from their bank. You fill in the IPO application in your bank’s net banking, and the bank blocks the money directly. There is no separate mandate to approve, and no ₹5 lakh limit.

UPI in SME IPOs

The same mandate process applies to SME IPOs on BSE SME and NSE Emerge. The minimum application there is usually two lots worth over ₹2 lakh, so the amount blocked is larger. Most single SME applications are still within the ₹5 lakh UPI limit.

Whose UPI ID you can use

The UPI ID must be linked to a bank account in the applicant’s own name. You cannot use a spouse’s, parent’s or friend’s UPI ID for your application. Applications paid from someone else’s account are rejected.

If you apply for family members from their own demat accounts, each application needs that person’s own UPI ID.

If the mandate request does not arrive

Requests usually arrive within minutes but can take longer on busy days. If nothing has come:

1. Check your UPI app. Look in pending requests, collect requests or mandates, not just notifications.
2. Check the UPI ID. Make sure the UPI ID in your broker’s app is typed correctly and belongs to the right app.
3. Check your order book. If the bid shows as rejected or failed, place a fresh bid.
4. Reapply in time. If there is still no request well before 5 pm on the closing day, cancel and reapply, or apply through net banking.

Changing or cancelling your bid

You can modify or cancel a bid in your broker’s app until 5 pm on the closing day. A modified bid usually creates a new mandate request, which you must approve again.

Cancelling in the broker’s app is what withdraws the bid. Revoking the mandate only in your UPI app may not cancel the bid itself, so always cancel in the broker’s app.

Common mistakes to avoid

• Leaving approval to the last hour. Requests can be delayed on the closing day, and 5 pm is a hard stop.
• Approving the wrong request. Check the IPO name and amount before you enter your PIN.
• Using someone else’s UPI ID. The bid is rejected.
• Not keeping the balance. If the money is not there when you approve, the block fails and so does the bid.
• Assuming “applied” means “valid”. Your bid counts only once the mandate is approved and the exchange shows it as accepted.

What to do next

Once your mandate is approved, there is nothing more to do until allotment. Learn how IPO shares are allotted, then check your allotment status on T+1. For the whole application, read how to apply for an IPO, or see open and upcoming IPOs.

Sources: SEBI circulars on UPI as a payment mechanism for public issues, including the ₹5 lakh limit for individual investors; BSE circular of 3 Aug 2022: mandate acceptance and bid modification close at 5 pm on the closing day, for issues opening on or after 1 Sep 2022; SEBI circular SEBI/HO/CFD/TPD1/CIR/P/2023/140 on the T+3 listing timeline, 9 Aug 2023 (unblocking by 4 pm on T+2).

Frequently asked questions