Issue and Pricing of Shares by Private Sector Banks

Approval of Reserve Bank of India (RBI) has made necessary for all private sector banks for the issue of shares through Initial Public Offers (IPOs) and preferential issues. Share market tips providers also have changes their policies accordingly. Further, while the banks were advised to follow certain prescriptions relating to pricing in respect of Initial Public Offers, SEBI requirements in respect of Bonus issues have also been indicated.
The guidelines in respect of issue and pricing of shares by private sector banks have been revised to incorporate the Qualified Institutional Placements mode of raising capital.
The revised guidelines are as follows:
a) RBI approval for IPOs should be obtained by all banks. After listing on the stock exchanges, banks are free to price their subsequent issues. Issue price should be based on merchant banker's recommendation.

b) Private sector banks, both listed and unlisted, need not seek RBI's approval for bonus issues. The issues would, however, be subject to SEBI's requirements on the issue of bonus shares, viz. bonus issues, should be made from free reserves built out of genuine profits or share premium. Further, bonus issues may be issued without linkage to rights issues.

c) All preferential issues would require prior approval of RBI. Pricing of preferential issues by listed banks may be as per SEBI formula, while for unlisted banks the fair value may be determined by a chartered accountant or option tips provider.

d) In case of pricing of issues where RBI approval is not required, pricing of issues should be as per SEBI guidelines; in cases where prior approval of RBI is required, pricing should take into account both SEBI and RBI guidelines.