As part of the rethinking on the T+6 timeframe for initial public offerings, the  Securities and Exchange Board of India is considering giving brokers a greater role in book-built issues.

Essentially, brokers will have to put in the full application money upfront with  the issuer, and realise the money later from individual investors.

In other words, brokers are being expected to take the credit risk of virtually making a clean advance to investors.

This solution, suggested by merchant bankers, is in the nature of a middle ground between Sebi which wants to compress the IPO process into six-seven days and merchant bankers who argue that such a timeframe is unrealistic because the banking system takes at least three working days to credit the proceeds of IPO application money to the issuer's account.

Merchant bankers argue strongly for the current proposal saying that since brokers have the resources to put in bulk application money on behalf of their clients, the issuers can receive the money much faster and can proceed with the rest of the application process in a compressed time frame.

Though Sebi was initially pushing the T+6 timeframe, chairman G N Bajpai had earlier said that the proposal was being "shelved" till a mutually acceptable solution is found.

In the interim, Sebi has told the bourses to upgrade their software capabilities to handle the IPO process faster.

Sources familiar with the development said Sebi had agreed to the proposal since it is almost akin to a secondary market transaction where the broker is anyway taking the credit risk on behalf of his client.

But there are some issues to be settled here, merchant bankers caution. For one, brokers may not be willing to take the credit risk for all investors, other than their own clients.

"Why would brokers accommodate all and sundry," a merchant banker asks, adding that brokers would prefer sticking to their own clients.

The other alternative is to have certain brokers designated specially to handle this business. This is the way the IPO process is handled in the more advanced markets.

Exchange sources said that this would mean putting an elaborate risk management system in place.