ASBA stands for Application Supported by Blocked Amount. It is one of the methods used by investors to transfer funds for IPO applications. Under this facility, you permit your bank to block the funds in your bank account when you apply for an IPO.
There is no actual debit from your bank account but you cannot use the blocked amount. The actual money gets debited from your bank account only when your IPO application is accepted and shares are allotted. If the shares are not allotted on the allotment date, this fund gets unblocked automatically.
So, with this facility, you do not have to wait for your refund in case your IPO application is rejected. In other payment modes, sometimes the refund is delayed by a day or two due to processing. Also, the interest income doesn’t stop during the blocking of funds as there was no actual debit and money is still with the bank.
Securities and Exchange Board of India (SEBI) introduced the ASBA facility for the ease of investors. This was introduced in December 2009. Banks that were listed as SCSBs (Self Certified Syndicate Banks) on the SEBI website are eligible to provide this facility. This facility was only offline initially and later became online in July 2010.
You can apply for an IPO through ASBA under both online and offline modes:
ASBA Application Process in Online Mode
If you are availing the ASBA facility online, you have to follow the following procedure:
- For online applications, you need to have a Net Banking facility.
- Check with your Bank whether it is an SCSB and provides an ASBA facility or not.
- After logging in to your Net Banking, you need to look for the IPO section.
- A list of IPOs open for subscription will be displayed and you need to select from it.
- If this is your first time making a payment through ASBA, you need to fill in all the details such as PAN, your demat details, Depository name, etc.
- Once all details are filled, enter the bid quantity and price.
- Re-check and submit the IPO Application.
An investor can apply through ASBA from 10 AM on the IPO open date. The cut-off time up to which the application can be last submitted is 5 PM on the IPO close date. The cut-off time might be different for your bank.
ASBA Application Process in Offline Mode
For offline mode, a physical form needs to be filled out while the online facility can be availed through ASBA net banking. Initially for online application, you need to fill in various details such as PAN, details of Depository Participant, etc. Once the registration is done for ASBA, you need to fill in just the quantity and bid price every time you apply for an IPO.
As soon as you submit the IPO application, the bank will block the amount from your bank account.
To be eligible for availing ASBA facility, an investor has to fulfill the following criteria:
- You must hold an active PAN and Demat Account.
- Your bank account should be in a bank that is enlisted as an SCSB as per SEBI.
- You should have sufficient balance in your savings or current account through which you are applying for an IPO.
ASBA can be applied through your bank's net banking facility. You need to search the Investments section after logging in to your net banking. This facility is offered only by banks and not brokers. All categories of investors can benefit from this facility except anchor investors. Even a minor can apply for an IPO through ASBA, which is not possible in the case of a UPI mandate.
Once the IPO application is submitted, your funds will be blocked by the bank. The bank will not debit the funds until you receive the allotment of shares. If you receive a partial allotment of shares, only that amount will be debited. The remaining unused amount will be unblocked.
Here are some benefits of ASBA:
- You will not lose your interest income as your funds are only blocked and not debited.
- It is faster as you will be required to enter only the bid quantity and price. Also, there are no additional days for refund processing in case of non-allotment.
This application does not affect your average monthly balance, as the blocked amount will be considered when calculating your account balance.
The investor can submit only a single application from a single bank account. If you are applying for the IPO on the last day of the issue, check the cut-off time with your bank. Though the ASBA facility has a cut-off time of 5 PM, many banks follow an earlier cut-off time.
You do not have to pay any charges for availing this facility. If you are applying through ASBA offline, don’t forget to collect the acknowledgement receipt from the bank. This would serve as proof for IPO application. So, keep this receipt until you either receive the allotment or the funds are unblocked.
ASBA facility is a path-breaking for both retail and other categories of investors. It has not only made IPO applications hassle-free but has also encouraged retail participation. At the same time, it does not affect the account balance calculation and interest income of investors. This further minimizes the procedural roadblocks in an IPO application.
For more in-depth knowledge and resources, visit the Sharekhan Knowledge Centre to enhance your investing skills.
Delve into the world of futures and options trading with Sharekhan expert guidance. Our comprehensive resources and intuitive platform empower you to make informed decisions and capitalize on market movements.
Embark on your stock trading journey with Sharekhan's comprehensive platform. Learn the fundamentals of equity trading, gain insights into market trends, and access powerful tools to make informed investment decisions.
Safeguard your investments with Sharekhan's secure and reliable Demat account. Our platform offers robust security features to protect your holdings, ensuring your investments are in safe hands. Open Demat account today and enjoy peace of mind while you invest.
Make informed mutual fund investment decisions with Sharekhan's expert guidance. Explore a wide array of funds to match your financial goals and risk tolerance. Start building your wealth today.
Leverage Sharekhan's market knowledge and experience to make informed decisions in the initial public offering (IPO) space. Our research and analysis equip you with the insights you need to identify promising IPOs and participate in their growth potential.
