Sebi Proposes Mandatory Electronic Payments for Dividends and Interest to Streamline Processes

The Securities and Exchange Board of India (Sebi) has suggested that all payments by listed companies, such as dividends, interest, and redemptions, be made exclusively through electronic means. This initiative aims to simplify payment processes while boosting security, convenience, and efficiency for investors.

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Currently, Sebi's Listing Obligations and Disclosure Requirements (LODR) rules allow electronic payments but also permit cheques or warrants if electronic transfers fail. This is especially true for amounts exceeding Rs 1,500. Failures often occur when a securityholder's bank details are incorrect or unavailable, necessitating cheque issuance.

Benefits of Electronic Payments

Sebi's consultation paper outlines several advantages of electronic payments. They are faster and more convenient than cheques, reduce the risk of loss during transit, and are environmentally friendly by cutting down on paper usage. Additionally, they lower administrative costs for companies and make tracking easier for investors.

Electronic payments also help minimise errors. Sebi has proposed that all payments, including dividends and interest, be made electronically for both demat and physical securityholders. Investors would be encouraged to update their bank details with depository participants to ensure smooth transactions.

Current Challenges and Data

According to recent data from Sebi, 1.29 per cent of electronic dividend payments fail among the top 200 listed companies. These failures highlight the need for accurate bank details to facilitate seamless electronic transactions.

Sebi has invited public feedback on this proposal until October 11. The regulator believes that transitioning to electronic payments will streamline processes and enhance overall efficiency in the financial market.