What is ASBA?

What is ASBA?

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.

Why was ASBA Introduced?

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. 

How Does ASBA Work?

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.

Eligibility Criteria For ASBA

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.

How To Apply For IPO Through ASBA?

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.