Execution of DDPI: Everything a Stockbroker needs to know about SEBI’s latest circular

August 25, 2022

Aditya Patel

Director - Growth


SEBI issued a circular on April 4, 2022 about Execution of Demat Debit and Pledge Instructions (DDPI) replacing power-of-attorneys that are usually given by investors to stock-brokers and depository participants.

From July 1, stockbrokers will not be able to collect PoAs from new clients they onboard. Instead their clients will need execute a document known as a “DDPI”[Note: SEBI has now extended this deadline to September 1, 2022]

What does DDPI mean for stockbrokers? What happens after September 1? Is this an additional compliance burden for stockbrokers?

In this FAQ we seek to demystify SEBI’s Circular on Execution of DDPI for stockbrokers - from a legal and operational perspective.

You can check out the entire circular issued by SEBI on execution of DDPI here.

What is the role of Demat Debit and Pledge Instruction (DDPI)?

Earlier, SEBI allowed stockbrokers to collect a Power of Attorney (“PoA”) from clients/investors. This PoA would authorize stockbrokers to perform key activities on behalf of their clients  in the course of day to day operations - namely transfer of shares/stocks/securities and pledging/re-pleding of securities.

In case clients did not give a PoA, stockbrokers would need to collect an authorization slip each time they wanted to perform a transaction on behalf of a client. Naturally, doing this for every client on a regular basis would be a massive operational nightmare for both stockbrokers and clients.

To avoid this, almost all stockbrokers (especially large ones operating digital interfaces) would collect a “Power of Attorney” from their clients.

Under the DDPI Circular - SEBI has done away with the Power of Attorney from July 1[Note: SEBI has now extended this deadline to September 1, 2022]. 

Instead of the Power of Attorney, clients will now need to execute a Demat Debit and Pledge Instruction (DDPI) to authorize stockbrokers to perform transactions on their behalf on a day to day basis

Note: DDPI does not invalidate existing PoAs. Stockbrokers would only need to collect DDPI from new customers that they onboard after September 1. The authorization given by existing customers via PoA would still be valid.

Ok, so a DDPI is a new type of document - but it essentially performs the same function as the PoA. What changes for stockbrokers?

Functionally, the DDPI performs the EXACT same function as the PoA.

However, operationally, the DDPI changes the game - it can be digitally signed.

SEBI provides explicit permission for the DDPI to be digitally signed. This was not possible for PoAs

So what if the DDPI can be digitally signed?

Under Schedule I of the IT Act, powers-of-attorney were excluded from the ambit of documents that could be digitally signed. 

For stockbrokers, this meant that the execution of the PoA was physical

In the last half a decade, most stockbrokers - from mid-size ones to large ones - digitally transformed their onboarding processes in an unprecedented way. However the PoA process was still physical due to Schedule I of the IT Act - creating serious operational hassles for digitally minded stockbrokers.

The new DDPI circular converts compliance into opportunity - with the “authorization” document now officially permitted to be digitally signed or “eSigned”.

But wait, the DDPI needs to be stamped - won’t this still be physical?

Good catch. Simple eSign is not enough. Unlike other documents in the stockbroker flow - both the PoA - and now the DDPI - needed to be stamped.

Physical stamping is a logistics nightmare:

  • Maintaining a network of stamp vendors to procure stamp papers
  • Coordinating with stamp vendors to maintain a regular supply
  • Purchasing stamp paper
  • Defacing the stamp paper appropriately
  • Attaching the stamp paper to the DDPI

Stockbrokers can overcome these challenges by incorporating digital stamping of DDPI documents in their onboarding process.

How does digital stamping work?

Digital customer onboarding is not an Aadhaar eSign game anymore - its a complete digital paperwork game.

Stockbrokers will need a solution that:

  • Provides seamless Aadhaar eSign with multiple backup options
  • Provides legally compliant digital stamping that integrates smoothly with the digital signing journey
  • Has a UI/UX that prevents customer drop offs

The eSign solutions commonly used by stockbrokers currently  are just that - eSign solutions. They provide very simple API calls that enable customers to apply a basic Aadhaar eSign on stockbroking paperwork. 

My current eSign solution tells me they already have digital stamping capabilities or are building it.

Stockbrokers will need to use DDPI from September 1.

For the current legal system in India, a complete digital stamping solution needs to:

  • Have a procurement process for physical stamp papers
  • Have a process to legally deface stamp procured physical stamp papers
  • Have a quality check process for defective/incorrectly defaced stamp papers
  • Have a fool-proof system to digitise physical stamp papers
  • Have a digital system to recover stamp papers in case customer does not complete the eSign - to prevent wastage and revenue loss
  • Have a guaranteed TAT commitment for provision of digital stamp papers - to give predictability to your onboarding operations

The above steps are not simply a “feature add-on” that can be built in a few sleepless nights. They require a dedicated operations team, a solid tech backend that supports stamp digitization and a trusted, pan-India network of stamp vendors that have gone through adequate KYC checks.

No matter what your “eSign vendor” promises you - they cannot build this overnight. 

Ok, now what? Am I consigned to physical flows?

You can choose one of three options:

  1. Go with physical DDPI + physical stamping just like you did with PoAs
  2. Ask your current eSign vendor to add an operations team, a compliance team, onboard and do KYC for a dedicated network of stamp vendors, build a digital backbone in compliance with the IT and Stamp acts, maintain dedicated support for stamping etc.
  3. Switch from eSign to complete Document Infrastructure which has eSign and eStamp built into a unified, easy-to-integrate flow.

Option C sounds too good to be true

Here’s where we make our plug.

Through Leegality’s Document Infrastructure platform - stockbrokers can build and deploy legally compliant, integrated eSign and eStamping flows for their customer journeys -  through one unified, easy-to-use interface.

More than 400+ top Indian companies have incorporated Leegality’s eStamp solution - BharatStamp - into their digital paperwork flows for a wide variety of use cases - from high stakes corporate agreements to mass scale retail lending agreements.

It is battle-tested and ready to be rolled out at scale today.

Here’s how BharatStamp is different from the “eStamp facility” promised to you by your “eSign vendor”:

Your eSign Vendor Leegality’s Document Infrastructure Suite
Operate with small tech teams designed to maintain basic eSign API Designed to digitally transform all touchpoints of the paperwork process - not just eSign
Are optimized only for a single, simple Aadhaar eSign workflow Has been deployed at scale for 700+ different types of BFSI flows of varying complexity
Don’t have a dedicated operations team Have a dedicated operations team working round-the-clock to provide digital stamping for 400+ enterprises
Don’t have a dedicated network of stamp vendors. Limited coverage. We have a pan-India stamping network across 25+ States and Union Territories. Our stamp vendors undergo strict KYC checks
Don’t have a legal and compliance backbone We have a dedicated team of lawyers involved in our product, sales, customer success and marketing teams. This means we are constantly evolving the product to respond to any regulatory changes in the future
Promise digital stamping via shortcut “tech workarounds” that do not comply with Section 4 of the IT Act and relevant stamping provisions Legally compliant with Section 4 of the IT Act and all Indian Stamp laws. Has been vetted by legal teams of PSU banks, global banks, Indian banks, PMS/AIF teams
Wastage of stamp papers in case of customer drop off - leading to revenue loss Zero wastage of stamp papers in case of customer drop offs - unsigned stamps can be re-used

Sounds like it will be too much of a hassle to switch

We understand the concern. Here’s something that may make you change your mind:

  • Your business and operations teams can setup a Leegality workflow (with eSign and eStamp) in a few hours - with just a mouse and a keyboard
  • Your tech team can integrate Leegality’s API in less than a day
  • We provide you free, end-to-end testing, integration support to help you go live as soon as possible
  • We provide you an account manager and round-the-clock support even after you go live
  • You can go live with Leegality - with an integrated eSign and eStamp flow in less than 21 days
  • With Leegality, we don’t charge you for API calls - but only for successfully signed documents. If the sign fails - you don’t pay

Click here to book a quick consultation with us to discuss how we can help you go live with digital execution of DDPI in less than 21 days.

Implement Digital Stamping for your DDPI flows by September 1.