Mumbai: In a move that will impact hundreds of thousands of small individual investors, market regulator Securities and Exchange Board of India, or Sebi, said on Tuesday its board approved an alternative payment mechanism for initial public offerings (IPOs) and rights issues, potentially eliminating what is still a protracted refund process.

Under the new system, application money for these share issues will remain in an investor’s bank account until the allotment of shares is finalized by the issuing company, speeding up the refund process. The decision comes just three months after Chandrasekhar Bhaskar Bhave took over as chairman and made reforming the IPO process—including fast refunds—an early priority for the regulator.

Bhave had first discussed his refund plan in a 7 April interview with Mint where he noted that the existing refund system was “an anachronism”.

Currently, in any IPO, once the issuing company finalized the basis of allotment, it had to ensure that the shares are credited to the applicants within two working days. Those not allotted shares or allotted fewer shares than they sought are refunded the money through electronic banking channels within 15 days from the close of the issue.

India’s booming stock market, at least until early this year, meant many IPOs were sharply oversubscribed and some individual investors missed out on applying for other, new share offers while they waited for their refund from an earlier IPO application.

Separately, Sebi also raised the minimum net worth criteria for portfolio managers from Rs50 lakh to Rs2 crore and said portfolio managers will not be allowed to pool resources of clients in any way “akin to mutual fund activities”.

It also approved regulations for issue and listing of debt securities, which were formulated to encourage corporate bonds markets by making the process of issuance more transparent.