SEBI wants companies to switch to electronic mode for payments to investors

The Securities and Exchange Board of India (SEB) has directed all listed companies to use electronic clearing services (ECS) facility and warrants for distribution of dividends or other cash benefits to the investors.

Advancements in the field of electronic payment systems in the last decade have made available various other modes of electronic funds transfer, viz, National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), etc, SEBI said in a circular issued today.

For making cash payments to investors, companies whose securities are listed on the stock exchanges should use, either directly or through their RTI & STA, any Reserve Bank of India (RBI) approved electronic mode of payment such as ECS [ LECS (Local ECS) / RECS (Regional ECS) / NECS (National ECS) ], NEFT, etc, the market regulator said.

Further, in order to enable usage of electronic payment instruments, companies whose securities are listed on the stock exchanges (or their RTI & STA) should maintain requisite bank details of their investors, it said.

For investors who hold securities in demat mode, companies or their RTI & STA should seek relevant bank details from the depositories. To this end, SEBI said, it has already advised depositories to ensure that correct account particulars of investors are available in the database of depositories.

For investors who hold physical share / debenture certificates, companies or their RTI & STA should take necessary steps to maintain updated bank details of the investors at its end.

In cases where either the bank details such as MICR (Magnetic Ink Character Recognition), IFSC (Indian Financial System Code) etc that are required for making electronic payment are not available or the electronic payment instructions have failed or have been rejected by the bank, companies or their RTI & STA may use physical payment instruments for making cash payments to the investors, SEBI said.

Companies should mandatorily print the bank account details of the investors on such payment instruments.

SEBI has directed stock exchanges to bring the provisions of the circular to the notice of all the companies whose securities are listed on the stock exchange and
also to disseminate the same on their web site.

Companies whose securities are listed on stock exchanges and their RTI & STA have also been directed to comply with the provisions of the circular.

Depositories have been directed to provide companies (or their RTI & STA) updated bank details of their investors.