Retail investors applying for initial public offerings (IPOs) of companies are expected to get a huge relief relating to refunds from such offerings. On Thursday, Securities and Exchange Board of India (SEBI) said an alternate payment system, aimed at mitigating time taken for refunds, would come into effect from Monday. The new system, will ensure that the money of such investors is not withdrawn from their bank accounts but are just blocked till shares are actually allotted to them.
The new system, called Applications Supported by Blocked Amount (ASBA), will be helped by a host of SEBI-certified lenders called Self Certified Syndicate Banks (SCSBs). In the first tranche, three banks — Corporation Bank, HDFC Bank and Union Bank of India — have been allowed to act as SCSBs. “These banks will act as SCSBs in public issues which open on or after September 1 onwards,’’ SEBI noted in a release. The IPO application forms for this payment mode will be submitted to banks which have been selected as SCSBs, the release noted. As of now, both — ASBA and the prevailing system of payment through cheques — would co-exist, SEBI chairman C B Bhave had said earlier this month. The new payment system will allow retail investors to pay only after shares are allotted in an IPO. Earlier, money used to be debited from the bank accounts of retail investors soon after the close of the offer and before the allotment of shares. Under the new system, SCSBs would accept applications under ASBA, only block the fund to the extent of the IPO bid amount and upload the details in the electronic bidding system of the bourses. Once allotment is done, they would release the funds as per allotment of shares. The new payment system will be available only in IPOs taking the book building route.
Additionally, only those retail investors who bid at the cut-off price as the single option and agree not to revise their bids, will be allowed to bid using ASBA.
The new system, called Applications Supported by Blocked Amount (ASBA), will be helped by a host of SEBI-certified lenders called Self Certified Syndicate Banks (SCSBs). In the first tranche, three banks — Corporation Bank, HDFC Bank and Union Bank of India — have been allowed to act as SCSBs. “These banks will act as SCSBs in public issues which open on or after September 1 onwards,’’ SEBI noted in a release. The IPO application forms for this payment mode will be submitted to banks which have been selected as SCSBs, the release noted. As of now, both — ASBA and the prevailing system of payment through cheques — would co-exist, SEBI chairman C B Bhave had said earlier this month. The new payment system will allow retail investors to pay only after shares are allotted in an IPO. Earlier, money used to be debited from the bank accounts of retail investors soon after the close of the offer and before the allotment of shares. Under the new system, SCSBs would accept applications under ASBA, only block the fund to the extent of the IPO bid amount and upload the details in the electronic bidding system of the bourses. Once allotment is done, they would release the funds as per allotment of shares. The new payment system will be available only in IPOs taking the book building route.
Additionally, only those retail investors who bid at the cut-off price as the single option and agree not to revise their bids, will be allowed to bid using ASBA.
