I hope you, your family, and the entire Zerodha team are safe and fine.
I have a suggestion which I was contemplating whether to share or not keeping in mind the team is working from home and there may be other priorities right now. Still sharing it as under:-
Can the Bank Mandate feature be used for automatic fund transfer to Zerodha trading account so as to always maintain a balance in the trading account?
E.g. I would like to always keep Rs 50,000 in my trading account. As soon as my trading account balance goes below Rs 50,000 the bank mandate feature would trigger to automatically transfer the difference amount from my bank account to the trading account to maintain the balance.
People be able to set how much amount they want to keep always as a balance. And it is not mandatory for everyone to do so. By default, it would be zero. Only those who would like to maintain a balance always in their trading account can set the balance amount to keep always so they don’t have to manually transfer funds.
Also, during quarterly settlements, the money in the trading account is transferred back to the Bank account as per the regulatory norms. But if the user wishes to keep a certain balance always, the moment funds are transferred from trading account to Bank account, it would trigger to add fund automatically and thus saves time from manual fund transfer.
I would like to discuss if you see any merit in this idea?
I think emandate settlement happens 1 day later and we get to know only once the money hits our bank account. Unlike the payment gateway where settlement again happens 1 day later, but there is a guarantee that money will come through, so we give instant margin on the platform.
Adding funds to your trading account using e-mandates involves the following steps:
Sending an instruction to the bank to transfer the funds
Receiving the funds and confirmation of the transfer
Let’s say you want to maintain Rs. 50,000 in your account at all times. In case the balance in your account is Rs. 70,000 on Monday and you purchase shares worth Rs. 40,000, now your balance becomes Rs. 30,000. We send an instruction to the bank to transfer Rs. 20,000 to your account on Monday. The funds (at the earliest) are then debited from your account around 1-2 pm on Tuesday and are credited by the bank to us around 8-9 pm. Along with crediting the funds to our account, the bank confirms where the money has come from by midnight and we post the credit to your ledger.
Accordingly, the earliest availability of the balance of Rs. 50,000 is Wednesday in this case. Until the bank attempts the debit, we will not get to know if your bank account is adequately funded for the transfer. Alternatively, we can allow the credit before the transfer gets completed on the basis of a real-time confirmation & block from the bank. This is currently not possible in the e-mandate framework but would make for a good feature for active traders once NPCI amends the setup to allow realtime requests to be processed.
There isn’t a way to automate real-time transfers based on the account balance. The currently available routes to enable this are either not real-time (in the case of mandates) or cannot read the trigger event of balance falling below a given level (in the case of standing instructions through net banking).
However, once the infrastructure or route for such automation is available we’ll try to implement this for our clients.
The UPI ecosystem is not yet ready with the recurring UPI mandate product. UPI Apps, issuing banks (merchant’s bank) and destination banks (user’s bank) will all need to work with NPCI to make this available. Given the lock down and lower incentives for the banks (because of zero charges), this is moving at a slow pace.
However, even when this is available, the suitability of UPI mandates for auto-funding the trading account is limited by following factors:
Permissible transaction amount - The transaction amount in case of recurring UPI mandates is likely to be limited to Rs. 2000 per mandate. Some merchants may get a user to make multiple mandates with them if the infrastructure allows for this. At the same time, banks may have individual sub-limits on the number of mandates which can be created with the same merchant by the user.
Requirement of pre-transaction notifications - RBI currently requires merchants to notify the user about upcoming transactions at least 24 hours in advance. This requirement will need to be relaxed or modified to allow realtime auto-debits.
What limited I read, for mandate up to Rs 2000, UPI pin is not required for recurring future auto payments. For > 2000, each time UPI pin would be required.
I think it would be implemented everywhere e.g. Insurance premium payments, telecom bill payments, electricity and gas bill payments so I don’t think number of transaction limits, etc would matter here. I am talking from the first principal thinking about the feature.
Of course, you can dig more into it once the technical documentation and API is available.
One thing I liked about the progress of Digital India is UPI and how it’s going from strength to strength.