India's securities regulator, worried about malpractice in a frothy IPO market, is investigating six domestic investment banks that have worked on offerings by small businesses, two sources with direct knowledge of the matter 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 was not able to learn the names of the banks under investigation. SEBI did not respond to requests for comment.

SEBI has launched an investigation into six local investment banks over concerns of inflated fees charged to small businesses during IPOs. Some banks reportedly demanded fees as high as 15% of funds raised.

The focus of these investigations, which began earlier this year, is on the fees charged by these banks to small and medium-sized enterprises (SMEs) during their IPOs. Preliminary findings suggest that these banks have levied charges equivalent to 15% of the funds raised through IPOs,

SEBI is investigating six domestic investment banks for charging high fees on IPOs by small businesses. The fees, as high as 15%, are much higher than the standard 1-3%. SEBI is also looking to curb coordinated activities between banks and investors to ensure fair practices in the booming IPO market.