To: All Licensed Banks

Subject: Engagement of banks in Initial Public Offerings (IPO) of Companies

The Central Bank has observed in the recent past a greater participation and indulgence of licensed banks in the IPOs that took place in the Securities Market. From the analysis of final results of some of the recent IPO’s, which had been heavily oversubscribed, it was obvious that some of the banks, through liberal lending, had acted quite irrationally and imprudently and had helped in creating a speculative market and crowding the issues to such an extent that it was quite possible for the small investor to loose interest in the market and make things counterproductive at the end.

As it could have been conceived, the upheavals brought about with the artificial momentum created by the banks in the share market has already impacted the demand for these IPOs in the open market as evidenced by the public enthusiasm to purchase them at an appreciated value even before the commencement of business by some of these new concerns.