The Securities and Exchange Commission (SEC) said in a statement IPOs valued at or above three billion rupees must reserve 40 percent for retail individual investors or shares to the maximum value of 1.5 billion rupees, whichever is lower.
The move was " . . .in order to further facilitate the fair allotment of shares to the retail individual investor category in large scale initial public offerings," the statement said.
"In determining the basis of allotment with the retail individual investor category, the smaller subscribers shall be given priority."
Under the earlier rule all IPOs irrespective of size were expected to reserve 40 percent for small investors.
But in several recent issues small investors did not take up their full allocation, which led to the new rule.
"For large issues we have capped the retail investor component," an SEC official explained.
"Previously, there was no cap and we said IPOs must allocate 40 percent to retail investors irrespective of size.
"Here, we're saying they must allocate a minimum of 1.5 billion rupees if it's really big - above three billion rupees, but not necessarily 40 percent."
The SEC statement also said the definition of retail investors had been changed for IPOs valued at over three billion rupees, doubling the subscription value up to 200,000 rupees.
For IPOs valued below three billion rupees, the retail investor category subscription value remains at up to 100,000 rupees.