The Securities and Exchange Board of India has directed bankers to public share issues to mandatorily use the real time gross settlement system for refund of money to investors.

The system, which has started with the initial public offer of Idea Cellular, will help in pruning the time for refunds to capital market investors and will be a vast improvement over the time-consuming system of cheque delivery.

Subsequently, Sebi proposes to direct stock exchanges also to use RTGS for all other types of payments in the capital market.

Meanwhile, in another set of development, the finance ministry has directed the market regulator to complete the process of replacing all transaction numbers in operation in the capital market with the Permanent Account Number by April 31.

As per the Budget announcement, all other numbers like the unique identification number, mutual fund identification number and others will be substituted by a core number of PAN with suitable suffixes and prefixes.

Sebi will soon issue the guidelines to the nodal bodies for mutual funds, brokerages and others.

Real Time gross Settlement is an RBI-monitored fund settlement system, which is used by the banks to route high value transactions for a certain fee. If all capital market funds are routed through RTGS, it will be easier for the RBI also to monitor the funds flow from the banks.

Anticipating higher capital market exposure by some private sector banks, the banking regulator has already raised the capital provisioning for equity market investments by the banks.

RTGS is a large value funds transfer system whereby financial intermediaries can settle inter-bank transfers for their own account as well as for their customers.

The system effects final settlement of inter-bank funds transfers on a continuous, transaction- by-transaction basis throughout the processing day.  The system went 'live' on March 26 with State Bank of India, HDFC Bank, Standard Chartered Bank, and Saraswat Co-operative bank implementing it.

The system will help in pruning the time for refunds to capital market investors