IPO Fundings

Rules for IPO Fundings Change by RBI-

The entire scenario of IPO Fundings went through radical changes in the year 2007 as per the directives of the Reserve bank of India. According to RBI, the lending limit for one investor would come down from Rs. 20 lacs to Rs. 10 lacs against any convertible bonds, equity-mutual funds, convertible debentures, PSU bonds and Equity shares. The loan limit set for each investor to invest in IPOs is Rs. 10 lacs and it has been strictly stated by the Reserve Bank of India that no single investor would be allowed loans more than the limit for investing in the IPOs.

Before 2007, the IPO market in India was rising heavily in terms of booking subscriptions which accounted for the lining up of at least two issues every week.

The market players were allowed to invest in at least five IPOs in India to make quick profits as it takes only 15 days after the closing date of the subscription of the company's IPO. The speculators will get a bit affected by the new set of rules being implemented for the IPO fundings. However, the chances of retail investors being affected by the same are much less. The banks are allowed to use up to 40 percent of their net worth for capital market related exposures.

ICICI Bank, Kotak Mahindra Bank and HDFC Bank are not entitled to direct exposure in terms of investing in their own subsidiaries, shares, joint ventures and regional rural banks. The fundings in IPO are issued to the investors with the aim to meet the investment requirements in public issues and other projects.