RBI Approval is must for Private banks in certain cases

Recently RBI come with circular mandating for private banks to obtain the prior approval of RBI before any IPO’s. 

As per the extant instructions, all banks in private sector were required to obtain approval of Reserve Bank of India (RBI) for issue of shares through Initial Public Offers (IPOs) and preferential issues. Further, while the banks were advised to follow certain prescriptions relating to pricing in respect of Initial Public Offers (IPOs), Bonus issues and Preferential issues, SEBI requirements in respect of Bonus issues have also been indicated.

In brief it will run as follows:

1. Initial Public Offers (lPOs): All banks should obtain RBI approval for IPOs. After listing on the stock exchanges, banks are free to price their subsequent issues
2. Rights issues:  RBI approval would not be required for rights issues by both listed and unlisted banks.
3. Bonus issues: Private sector banks, both listed and unlisted, need not seek RBI's approval for bonus issues, but issues would  subject to SEBI guidelines.
4. Preferential issue:  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 a merchant banker.

5. Qualified Institutional Placement (QIP): Private Sector Banks need to approach RBI for prior 'in principle' approval in case of Qualified Institutional Placements

Thus 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

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