Sebi on Tuesday announced an alternate payment system for public issues to ensure the process works smoothly. In this the retail investors will not have to deposit money upfront while applying for shares. This will be launched by August-end as a pilot project. While both the current system of payment through cheques and alternate system would co-exist, as per the Sebi chairman.
The new payment system called additional mode of payment through Applications Supported by Blocked Amount, will exempt retail investors from making full advance fees and the amount to be retained in bank accounts till the completion of allotment.
The alternate payment system is dependent on 'Self-Certified Syndicate Banks', which would accept the application of retail investors.
Under the scheme, the money an investor pays while applying for an IPO will remain in his bank and earns interest till the allotment is made. These banks will block the fund to the extent of bid amount, upload the details in the electronic bidding system of BASE or NSE and then unblock once the basis of allotment is finalized and transfer the amount for allotted shares to the issuer.
The new payment system called additional mode of payment through Applications Supported by Blocked Amount, will exempt retail investors from making full advance fees and the amount to be retained in bank accounts till the completion of allotment.
The alternate payment system is dependent on 'Self-Certified Syndicate Banks', which would accept the application of retail investors.
Under the scheme, the money an investor pays while applying for an IPO will remain in his bank and earns interest till the allotment is made. These banks will block the fund to the extent of bid amount, upload the details in the electronic bidding system of BASE or NSE and then unblock once the basis of allotment is finalized and transfer the amount for allotted shares to the issuer.
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