KARACHI, July 21: The State Bank has taken notice of the fact that during the public issue of shares the bankers to the issue do not accept subscription applications from those who are not their account holders.

The SBP's Banking Policy Department has issued a circular to all banks warning them to discontinue this practice or be ready to face action. "It has come to our knowledge that during public issue of shares the bankers to the issue do not accept and process duly completed subscription applications from prospective investors who are not their account holders," the circular states.

(Bankers to the issue means the banks that are authorized to receive applications for shares. Duly completed applications are those that are accompanied with pay order in favour of the issuer company and copy of the national identity card of the applicant).

"This is discouraging the investments in capital markets by small investors, besides causing inconvenience to the account holders of other banks who wish to subscribe in the new capital issues." So the practice "is defeating the very purpose for which these issues are offered for sale to general public."

The circular says the central bank has viewed this practice seriously. It says that "the bankers to the issue will, with immediate effect, ensure that their branches accept and process all duly completed subscription application from all applicants irrespective of the fact whether these applicants are their account holders or not.

The circular advises all banks to issue immediately necessary instructions in this regard to their respective branches "under intimation to the SBP to ensure compliance of the above instructions in letter and spirit." It warns that any breach of these instructions will attract penal action from the central bank.