The Securities and Exchange Board of India is planning to tap the banks in order to spread the equity cult among the masses. The vast banking distribution network is expected to make equity more accessible to retail investors.
This was one of the serious possibilities discussed by Sebi at a recent meeting with merchant bankers.
According to sources familiar with the development, during the discussions it was recognised that a bank -- any branch of any bank -- is a place that all people frequent, whether in urban or rural places.
Right now banks just act as collection centres for subscriptions to primary issues.
"We are exploring the possibility of selling shares through the banking channel," said a merchant banker.
The idea is that banks will act as a first level intermediary for buying shares, as in the case of mutual fund units. Investors will just have to put in their requests in any bank branch and the banks will execute orders through their own brokers.
The need to spread the equity culture on a wider base was felt in the recent spate of public offerings where more than 70 per cent of the participation was from institutional investors and retail investors were virtually sidelined.
While retail investors can invest through brokers, brokers are concentrated in urban centres and most brokers do not cater to smaller investors, since it is not cost effective for them.
Online broking outfits do cater to low value retail investments but Internet penetration is very low in the country.
According to Sebi officials, this would be an uphill task as it would require changing the mindset of the banking system.
Mutual fund units and other products are sold through banking channels at present, but it is mostly the foreign banks and private banks that are active in this; public sector banks are still lagging behind.
Wider platform
- Sebi exploring the possibility of selling shares through the banking channel.
- The need to spread equity culture on a wider base was felt when it was seen that more than 70 per cent of participation in public offerings was from institutional investors while retail investors were virtually sidelined.
- Most brokers do not cater to smaller investors, as it is not cost effective for them.
