SEBI proposes to double the retail investor’s cap to Rs 2 lakh

SEBI has released a discussing paper which proposes to raise the investment limit for retail investors from the current Rs 1 lakh to Rs 2 lakh. Regulation 2 (1) (ze) of SEBI (ICDR) Regulations, 2009 defines "retail individual investor" to mean an investor who applies or bids for specified securities for a value of not more than one lakh rupees. The discussion paper seeks to increase this limit to two lakh rupees on account of the following reasons:

• SEBI feels that retail individual investors who have the capacity and appetite to apply for securities worth above one lakh rupees were constrained from doing so because of the one lakh limit nor do they make an application under the non institutional investor category because the allocation there is limited to 15% as against 35% for retail individual investor category.
  
• Inconvenience faced by merchant bankers in big offerings to get enough number of retail investors because of the limit of one lakh rupees.
  
• Due to factors like inflation, currently one lakh rupees can buy only lesser number of shares as compared to 2005 (when the one lakh limit was fixed).
  

A copy of the discussion paper is available here.