The entire issue allotment process is sought to be made on-line through the exchange's trading terminals with brokers being made the collection centres and the entire process being routed through the clearing mechanism of the exchange.

The measure is, however, not expected to take off for the next six months because the exchanges are caught up with the Y2K problem. Only after they have tackled this problem would they be in a position to make any changes in their software.

The first meeting of the Sebi committee on on-line issuance ofshares was held on Wednesday. The National Stock Exchange (NSE) and the Over-the- Counter Exchange of India (OTCEI) made a joint presentation to Sebi chairman D R Mehta and senior executive director O P Gahrotra. The Bombay Stock Exchange and the Calcutta Stock Exchange were the other two exchanges which attended the presentations.

NSE, it is learnt, made it clear that in the beginning, till the system was not tested, it would not be feasible for the exchange to guarantee the fund flow through the broker to the clearing house. This put the system to a bit of risk, they felt. However, Sebi officials were of the view that even in the existing public issue system the investor hands over his money to an agent which makes the current system as risky.

It was felt that the risk element should not be blown out of proportion or else a sound mechanism, which could drastically lower the cost of issuance and reduce the time period taken for the allotment of shares, could end up in the cans.

In its detailedpresentation, NSE said that the post-issue allotment process could be completed in as little as 15 days from the date of closure of the issue. This is in contrast to the current two months that it takes for an allotment to reach an investor.

On the other hand, it was pointed out that the costs involved in issue allotment would come down drastically. At the registrar's end, the cost would come down in case of non-allotment of shares from Rs 3.50 per application to nil. The same would be the case for applications through stock invest. Cost of postage in case of allotment of demat shares and cases of refund would be nil as compared with Rs 12 in the current system. At the bankers to the issue end the cost of Rs 2.50 for application and Rs 3 for a refund would come down to nil in the new system. The costs of printing and stationery would come down substantially.