An alternate payment system for public issues that will not block retail investors' money unless shares are actually allotted to them will be launched as a pilot by August-end, market regulator Sebi said today.
"Hopefully by August end, we will start the pilot project," Sebi Chairman C B Bhave told reporters on the sidelines of a seminar organised by the Financial Planning Standards Board India.
"We really don't know how the system works. We need to get used to it. We have to sort out glitches if there are any in the beginning," Bhave said.
Both the current system of payment through cheques and alternate system would co-exist, the Sebi Chairman said.
"It (alternate payment system) will not be pushed on to everybody," he said.
The alternate payment system, called Additional Mode of Payment through Applications Supported by Blocked Amount — will exempt retail investors from making full advance fees and instead let 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, these banks will block the fund to the extent of bid amount, upload the details in the electronic bidding system of the BASE or NSE and then unblock once basis of allotment is finalised and transfer the amount for allotted shares to the issuer.
