Retail investors who bid under single option will be eligible

SEBI invites public comments by June 5

Self Certified Syndicate Banks suggested

MUMBAI: The Securities and Exchange Board of India on Wednesday proposed a payment process for public issues which do not require retail investors to block their money unless they are allotted shares.

SEBI came out with an idea of Self Certified Syndicate Banks (SCSB) for this purpose, which would accept applications of retail investors.

These banks would block the bid amount, upload the details in the electronic bidding system of the Bombay Stock Exchange of the National Stock Exchange, unblock once the basis of allotment is finalised and transfer the amount for allotted shares to the issuer.

This payment process is proposed to co-exist with the current cheque mode of payment, where money is blocked even if shares are not allotted.

Only those retail investors, who bid at the cut-off price as the single option and agree not to revise their bids, would be eligible to be part of this payment process.

SEBI has invited public comments by June 5 on its proposals.

An SCSB is the bank which would offer its account holders the service of making an Application Supported by Blocked Amount (ASBA) in issues.

For this purpose, an SCSB would have to have an arrangement with the BSE or the NSE for uploading the bid in their electronic bidding system.

SCSB will also have to undertake the mock trial run of its systems with the BSE and the NSE and a few registrars to the issues.

Earlier this month, the SEBI board gave an in-principle approval to the alternative mode of the payment scheme for public issues.

As per the SEBI scheme of things, SCSB will capture the relevant details from the bid-cum-application form of investors having an account with the bank. The applications could be made in the physical mode or the electronic mode through the net banking facility. These banks would then block funds in the client-investor’s account to the extent of application/bid moneys till the basis of allotment is finalised.

They would release the funds in favour of the issuer only upon receipt of request from registrar, once allotment is finalised.

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

At present, applicants have to wait for quite some time to get refunds on non-allotment of shares. — PTI