The Securities and Exchange Board of India (SEBI) has proposed a series of reforms to strengthen the regulatory framework for SME initial public offerings (IPOs), including setting a minimum issue size, doubling the minimum application size and introducing a "draw of lots" system for non-institutional investors (NIIs).

In a consultation paper, the SEBI proposed raising the minimum application size in SME IPOs from Rs 1 lakh to Rs 2 lakh to ensure only informed investors with a higher risk appetite apply for it.

SEBI has invited public opinion on whether the threshold should be moved up to Rs 4 lakh, which would eliminate the retail investor category and reallocate reservations to non-institutional investors (NIIs).

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