Applications Supported by Blocked Amount

What is Applications Supported by Blocked AmountASBA is a process developed by SEBI for applying in IPO. ASBA is an application that contains an authorization to the investor‘s bank to block in his bank account an amount equivalent to the application money while applying for an issue. If an investor is applying through ASBA, his application money shall be debited from his bank account only upon his application is selected for allotment after the basis of allotment is finalized by the issuer. Amount that is equivalent to the allotment only shall be debited by the bank while the rest is freed up.

Why was the need for ASBA?

Before the introduction of ASBA, retail investors were required to attach a cheque/demand draft that is worth the full share application money for the shares he applies for. Later, post clearance these applications will be considered for allotment. In case of oversubscription, the issuer has to initiate the refunds to those having allotted no/a part of the total shares applied. And the complex process of refunds was so cumbersome that the refund warrants getting misplaced/lost in transit resulted in the largest number of complaints in IPOs being related to refunds. Later on SEBI has solved this problem by implementing ASBA.

Mandatory:

As per SEBI circular no CIR/CFD/POLICY CELL/11/2015 dated November 10, 2015, ASBA was made mandatory for all public issues opening on or after January 01, 2016

How to apply for an IPO through ASBA?

Investor should submit the ASBA form which is available at the designated branches of the banks acting as Self Certified Syndicate Banks (SCSB) after filling the details such as name of the applicant, PAN number, demat account number, bid quantity, bid price and other relevant details, to their banking branch by giving an instruction to block the amount in their account. Investors can submit the ASBA form to the trading members connected with the IPO. Also, the investor can generate e-ASBA form from stock exchange’s website https://www.nseindiaipo.com/issueforms/html/index.html for any issue.

What is Self Certified Syndicate Bank (SCSB)?

Certain banks have been designated by SEBI as a bank capable of providing ASBA services to its customers. These are known as SCSB. Following link helps you find the bank branches acting as SCSB for ASBA: http://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=35 . One does not need to have a demat account with the bank to submit the ASBA forms. In case the issue fails/withdrawn the SCSB shall unblock the application money from the bank accounts upon receiving instructions from issuer. In case of any complaints pertaining to his application the investor shall approach the bank.

Advantages of ASBA

  1. Investors don’t have to bother about the refunds in case of partial / no allotment
  2. A lot of time and costs involved in the manual refund process (as was in case before introduction of ASBA) is eliminated.
  3. Investor’s money remains in his bank account till the allotment is made. Thus he earns interest on the same till then.
  4. Unlike in the old systems, investors do not have to bother about losing the refund warrants posted by the issuer to his address.