Sebi plans to extend banking channel for HNIs

By siliconindia   |   Friday, August 28, 2009
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Bangalore: Markets regulator Securities and Exchange Board of India (Sebi) is planning to expand the banking channel for subscription to initial public offerings (IPO) to high networth individuals (HNIs) and institutions in addition to retail investors, reports Mint. The banking channel enables retail investors to directly subscribe to an IPO by putting their money into an online account that is blocked until the final allotment. Sebi recently extended this facility to rights issues as well. Sebi discussed the subject at a meeting with a group of registrars last week. Registrars are intermediaries responsible for receiving and uploading bids, collection of application money and allotment of shares in an IPO. Currently, only resident retail individual investors are allowed to invest through the direct banking channel. According to Sebi rules, 30 percent of an IPO is reserved for retail bidders, 10 percent for HNIs and the rest for institutional investors. One key issue that emerged during the discussions between Sebi and the registrars was that the banking channel currently only allows investors one bid option to apply which is at the cut-off price. So the bidders agree to bid and purchase shares at the final issue price that is determined by the issuers.
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