India's securities regulator is investigating six domestic investment banks that have worked on offerings by small businesses, Reuters quoting "two sources with direct knowledge of the matter" reported.
The probes by the Securities and Exchange Board of India (Sebi) began earlier this year and are focused on the fees that the banks have charged, the report said.
It has found that at least half a dozen small investment banks have charged companies fees equivalent to 15% of funds raised via their IPO, they added. That's much higher than the standard practice of 1-3% in India.
Reuters said it was not able to learn the names of the banks under investigation. Sebi did not respond to requests for comment.
Sebi's preliminary findings suggest that the high fees are being charged to ensure the offerings are oversubscribed, Reuters said quoting a sources.
The regulator is looking to curb coordinated activity between banks and some investors who break rules to place huge bids both as high net-worth individuals and as ordinary retail investors, the second source said.
"These bids are not genuine and are cancelled at the time of allotment but the high subscriptions end up attracting more bids and investments from other investors," the source added.