MUMBAI: Retail investors who are ready to apply at the cut-off price
in a public issue on the condition that they will not revise their
bids later on, will be eligible to use the proposed Applications
Supported by Blocked Amount (ASBA) mode of payment. Under ASBA, the
application money will not leave the investor's account till the basis
of allotment has been finalised.
The market regulator has worked out the modalities for the proposed
system and has invited public comments for the same. June 6 has been
fixed as the last day for submitting comments or suggestions. However,
ASBA method will be only an optional one and would co-exist with the
current system of investors using cheque as a payment instrument.
According to the proposed process, retail investors would have to
submit bids at the cut-off price through self-certified syndicate
banks (SCSBs) in which they have their accounts. Thereafter, the banks
would accept the applications, block the funds to the extent of bid
payment amount, upload the details in the electronic bidding system of
BSE or NSE, unblock the money once the basis of allotment is finalised
and transfer the amount for allotted shares, to the issuer.
"This (ASBA) would co-exist with the current procedure of investors
applying through sub syndicate/syndicate members with cheque as a
payment instrument," says the SEBI document. Meanwhile, if sufficient
balance for blocking the amount is not available in the applicant's
account, the application shall be rejected.
According to the market regulator, banks that wish to be recognised as
SCSB must hold a valid registration certificate as a banker to issue
under the SEBI (Bankers to an Issue) Regulations, 1994. Banks also
need to undertake mock trial run of its systems with BSE or NSE and
few registrars and in order to check that the adequate systems and
infrastructure are in place at its controlling branch and the
designated branches.
Such banks must also have an arrangement with BSE or NSE, which would
allow them access to the web-enabled interface of BSE or NSE for
uploading the bid/application data in their electronic bidding
system.
Sebi has directed the stock exchanges to make available a web-enabled
access to their electronic bidding system to the SCSB and the
designated branches for uploading of the bid/application data.
SCSBs, which wish to enable online application through ASBA, will have
to use its own net banking facility and will not be allowed to compel
the investor to apply through brokerage entities that are its
subsidiaries or associates or with whom it might have some
arrangements.
Interestingly, the proposed modalities are in line with chairman CB
Bhave's intention of cutting down the time between a company's public
issue and its listing from 21 to seven days. The approval to marking
lien on bank account is being seen as the first step in that
direction. SEBI, during its board meeting on May 13, gave an 'in-
principle' nod to marking lien on bank account as an alternative mode
of payment in public and rights issues.
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