9 Dec, 2024
3 mins read
The Application Supported by Blocked Amount (ASBA) is a financial mechanism introduced by SEBI to streamline the application process for IPOs (Initial Public Offerings). By allowing funds to remain blocked in an investor’s account until share allocation, ASBA eliminates refund delays, ensures transparency, and makes investing more convenient.
This blog explores the meaning, process, and eligibility criteria for ASBA while highlighting its key benefits and potential drawbacks.
ASBA, or Application Supported by Blocked Amount, is a process where investors authorize their banks to block the application money in their accounts when applying for an IPO. The amount remains in the account, earning interest, and is debited only when shares are allotted. If the investor is not allotted shares, the blocked funds are automatically released.
Introduced by SEBI in 2008, ASBA is mandatory for all IPO applications. It ensures better utilization of funds and eliminates the need for physical cheques or demand drafts.
The ASBA process is simple and transparent:
Application: The investor submits an ASBA form either online via net banking or offline through their bank branch.
Blocking of Funds: The bank blocks the application amount in the investor’s account, which remains unavailable for other transactions but continues to earn interest.
Processing: The blocked amount is used only if the shares are allotted; otherwise, the funds are unblocked.
Allotment or Refund: Based on the share allotment, the respective amount is debited from the account, and any unutilized funds are released.
Interest Retention: The blocked amount continues to earn interest during the process.
Streamlined Application: Eliminates the need for refunds in case of non-allotment.
Paperless Transactions: Can be completed entirely online, ensuring ease of use.
Mandatory Compliance: Applicable to all IPOs and rights issues.
Convenience: No cheques or demand drafts are needed. Applications can be made online.
Cost-Effective: The process is free of charge for investors.
Transparency: Investors retain control over their funds until allotment.
Timely Refunds: Automatic unblocking of funds in case of non-allotment.
Efficient Fund Management: The blocked amount contributes to maintaining the account’s Average Quarterly Balance (AQB).
To use the ASBA facility, investors must meet these conditions:
Indian Residency: Only resident Indian investors can use ASBA.
Bank Account: The investor must have an account with a Self-Certified Syndicate Bank (SCSB) offering ASBA services.
Demat Account: A valid demat account is mandatory.
PAN Card: The applicant must possess a valid PAN card.
Adequate Funds: Sufficient balance in the account to cover the application amount.
Digital Dependency: Investors need internet access and familiarity with net banking.
Bank Restrictions: Only banks registered as SCSBs can process ASBA applications.
Eligibility Limitation: Non-resident Indians (NRIs) and foreign investors are excluded.
Log in to your net banking account.
Navigate to the IPO/ASBA section.
Select the IPO you wish to apply for and fill in details like bid quantity, bid price, and demat account number.
Submit the application and confirm the blocking of funds.
Download the ASBA form from the NSE or BSE website or collect it from your bank.
Fill in the required details and submit the form at your bank branch.
The bank will block the funds and upload the details for processing.
ASBA has transformed IPO investing in India by making the process more efficient, secure, and investor-friendly. For those looking to explore new investment opportunities in IPOs, ASBA is an indispensable tool.
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Indian residents with a valid PAN card, demat account, and an account in a Self-Certified Syndicate Bank (SCSB) can use ASBA.
An IPO refers to the process of a company offering shares to the public for the first time. ASBA is a mechanism to apply for IPOs without upfront payment; the funds are blocked in the investor's account until shares are allotted.
Retail investors can apply for IPOs through ASBA up to ₹2,00,000. For higher amounts, investors fall into the High Net Worth Individual (HNI) category.
ASBA is preferred for its transparency and interest retention on blocked funds. UPI, while faster, does not allow funds to earn interest during the blocking period.
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