Retail Investors can now apply for company shares (IPO) without initial payment

No more wait for IPO refunds! It is really good news for who waited months together for IPO refunds after no allotment letter from the company came for public offer.

As per recent news release, Sebi says investors can apply without having to transfer cash

Many investor complaints can be avoided by making some systemic changes, the chairman of the Securities and Exchange Board of India, C B Bhave, had said two weeks ago.

On Tuesday, the Sebi board has come out with a new way of applying for IPO. This new method which is still in proposal stage would provide for an electronic lien on investors’ bank accounts in case they applied for IPO.

What this means is, the retail investor can participate in the public or rights issue, without the application money actually leaving his bank account.

The bank will mark a lien on the customer’s account to ensure that the requisite sum is locked in until the allotment process is finalised.

The money will be transferred to the company only when the actual allotment takes place.

In case the allotment does not happen, the money gets automatically unlocked and is at the investor’s disposal.

“The board approved, in principle, the concept of marking lien on bank account as an alternative mode of payment in public rights issues. The concept will enable the application money to remain in the bank account of the applicant till such time the allotment is finalised and thus eliminate the refund process,” the market watchdog said in a release.

Currently, the retail investor has to pay the application money in advance.

Since there is a mandatory 21-day gap between subscription and allotment, the money stayed with the bankers as a “float”.

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