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New payment mode for IPOs soon: SEBI

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To ensure that the funds of retail investors are not blocked until the actual allotment of shares, Securities and Exchange Board of India (SEBI) announced that an alternate payment mode for public issues will be launched by the month-end as a pilot project.

Speaking to media, SEBI chief CB Bhave said: “Hopefully by August-end, we will start the pilot project. We really do not know how the system works, and need to get used to it. We have to sort out glitches, if there are any, in the beginning.”

Under the new payment system, to be called ‘additional mode of payment through applications supported by blocked amount’, retail investors will be exempted from making full payment in advance. Instead, the amount will be retained in bank accounts of the prospective investors till the completion of allotment of shares.

This alternate mode of payment is to apply only to public issues offered under the book-building route. Also, only those retail investors who bid at the cut-off price as the single option and agree not to revise their bids will be part of this payment process.

The alternate payment mode will be an additional facility to investors and co-exist with the prevalent system of payment through cheques for public issues. “It will not be pushed on to everybody,” Bhave said.

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