SEBI finalises alternate payment system for new issues

Mumbai: The Securities and Exchange Board of India (Sebi) has approved fresh guidelines for initial public offer (IPO), exempting investors from making 100 per cent advance fees, and instead allowing the amount to be retained in bank accounts till the completion of entire allotment process.

The new rules under the alternate payment system for public issues allows retail investors to block their money unless they are allotted shares. They have to pay the amount for allotted shares only.

Under the scheme, these banks will block the fund to the extent of bid amount, upload the details in the electronic bidding system of the BSE or NSE and then unblock once basis of allotment is finalised and transfer the amount for alloted shares to the issuer.

The alternative payment system is dependent on `Self Certified Syndicate Banks', which would accept the applications of retail investors and the current system of cheque mode of payment will continue to exist alongside, Sebi said.

The market regulator has issued circulars to stock exchanges, merchant bankers, registrar and bankers to issues in this regard.

Sebi, however, did not announce the date when the alternate payment system - called Additional Mode of Payment through Applications Supported by Blocked Amount (ASBA) - will come into effect.

The scheme will apply only to public issues offered under book building route and only those retail investors would be part of this payment process who bid at the cut off price as the single option and agreed not to revise their bids.

The new system is expected to eliminate the process of giving refunds by companies to the applicants in case of non-allotment of shares.