The Securities and Exchange Board of India (Sebi) has set in motion the process of an alternate payment system for public issues that will not require retail investors to block their money unless they are allotted shares. The move comes two days ahead of a meeting of the high-level committee on capital markets in Mumbai on August 1.Called the ‘additional mode of payment through applications supported by blocked amount’ (ASBA), the system is expected to co-exist with the current mode of payment through cheques where money is blocked even if shares are not issued. The system is dependent on self-certified syndicate banks, which would accept the applications of retail investors.The move follows the recommendations of the group on review of issue process (GRIP) set up by the primary market advisory committee of Sebi last July. However, the market regulator is yet to act on a host of other suggestions — right from the application stage to price discovery and listing stages — that would help compress the timeline for listing of companies to a week from almost a month now.As per the scheme, the syndicate banks would block the fund to the extent of the bid amount, upload the details in the electronic bidding system of the Bombay Stock Exchange or the National Stock Exchange, release the funds once the basis of allotment is finalised and transfer the required funds to the issuer. The scheme is applicable only to public issues offered under book building route. Under the scheme, only those retail investors would be part of this payment process who bid at the cut-off price as the single option and agreed not to revise their bids.The new 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.The regulator has issued circulars to stock exchanges, merchant bankers, registrar and bankers on the new system. However, it has not disclosed the date when the new payment system will come into effect.
