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.

Hyundai Motor India is set to make a significant splash in the Indian IPO market. The South Korean automaker has secured SEBI approval for its $3 billion IPO, valuing the company at around $20 billion.

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.

India’s market regulator, the Securities and Exchange Board (SEBI), has launched an investigation into six domestic investment banks over their handling of initial public offerings (IPOs) by small businesses.