SEBI Issues New IPO Rules: Check Details Here

Capital market regulator Securities & Exchange Board of India (SEBI) has issued new rules with respect to the application for Initial Public Offering (IPO). SEBI has increased the size of bids that retail investors can submit in an IPO using the Unified Payment Interface (UPI).

In a circular issued on April 5, the regulator enhanced the limit to Rs 5 lakh from the current Rs 2 lakh. The new IPO rules will come into effect on May 1, 2022. This means that an individual investor can bid up to Rs 5 lakh through UPI for IPOs that will open on or after May 1.

SEBI had permitted the use of UPI to bid for IPOs in November 2018. This came into effect on July 1, 2019. 

The new rules for IPO application come nearly four months after the National Payments Corporation of India (NPCI) increased the per transaction limit in UPI to Rs 5 lakh from Rs 2 lakh for UPI-based Application Supported by Blocked Amount (ASBA) in IPOs.

NPCI has reviewed the systemic readiness required at various intermediaries to facilitate the processing of applications with increased UPI limit and confirmed that as on March 30, 2022, more than 80% of SCSBs/Sponsor Banks/UPI Apps have conducted the system changes and have complied with the NPCI provisions, SEBI said.

“Accordingly, it has been decided that all Individual Investors applying in Public Issues where the application amount is upto 5 Lakhs shall use UPI and shall also provide their UPI ID in the bid-cum-application form submitted,” the SEBI circular on the new IPO rule said.

What Is ASBA?

ASBA means “Applications Supported by Blocked Amount”. It is an application that contains authorisation to block the share application money in the bank account for subscribing to an IPO. The method, developed by SEBI, enables blocking of funds for IPO, Rights Issue, Follow-on Public Offer (FPO) etc., applications. 

When an investor applies through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed.

What Is UPI?

Unified Payment Interface or UPI is a payment system that instantly transfers funds from one bank account to another bank account. Developed by the National Payments Corporation of India (NPCI), UPI facilitates inter-bank peer-to-peer and person-to-merchant transactions.

UPI powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. The system allows several banks to interconnect and transfer funds under one umbrella. With the use of UPI, a person can transfer money anytime and anywhere as it works on a 24×7 basis.

This system has a highly secured encryption format. Hence, all the transactions are safe and secure. Several apps support UPI like BHIM, Google Pay, and Paytm, among others.

How to Apply For IPO Through UPI?

Step 1: Login to your online account with the broker. Select the IPO name from the current IPO list. 

Step 2: Enter the lot size you want to bid for and the bid price.

Step 3: Type your UPI ID and hit the submit button. 

Step 4: Approve the transaction on your UPI app.

You will receive the mandate notification in the UPI app. Accept the mandate and the application money will remain blocked until the IPO allotment date. You will receive an SMS from the exchange confirming your application.