When you apply for an IPO, it becomes necessary to know how the application amount is managed in the process of allotment. The Application Supported by Blocked Amount (ASBA) is the SEBI prescribed mechanism under which the application amount remains blocked in your bank account rather than being credited. In case of allotment of shares, the amount gets debited from the blocked amount. In case of no or partial allotment, the leftover blocked amount is released from the bank according to the relevant process.
What is ASBA in IPO?
In IPO, ASBA is the facility prescribed by SEBI for application of the eligible public issue. Under this system, the application amount remains blocked in the investor’s bank account instead of crediting it immediately.
In case of allotment of shares, the relevant amount is debited from the blocked amount. In case of non-allotment or partial allotment of shares, the left-over blocked amount is released from the bank after completion of the allotment process according to the relevant timeline.
How Does ASBA Work?
1. Apply for the IPO
Submit the bid quantity and bid price and authorize your Self Certified Syndicate Bank (SCSB) or any other application method to block the application amount.
2. Blocking of Funds
Only the application amount corresponding to the bid is blocked in the bank account and the rest is kept available for normal transactions. The blocked amount may keep on earning interest depending on the relevant savings bank account terms.
3. Basis of Allotment
After closure of the IPO, the basis of allotment is decided and the number of shares allotted to the eligible applicants is fixed.
4. Deduction or Releasing of Funds
In case of allotment of shares, the amount corresponding to the shares is debited from the blocked amount. In case of non-allotment or partial allotment, the left-over blocked amount is released.
Key Features of ASBA
The ASBA system allows applying for IPOs via the banking system while keeping the application amount in the investor’s own bank account until allotment.
- Not transferred immediately: The application amount is blocked in your bank account and is not credited immediately.
- Earning interest: The blocked amount may keep on earning interest according to the relevant savings account terms.
- No refund procedure: As funds are kept in your own bank account, there is usually no refund transaction in case of non-allotment.
- Integration into the banking system: Applications are processed through the Self Certified Syndicate Banks (SCSBs) or any other authorized application methods.
- Debit according to the allotment: In case of partial allotment, only the relevant amount is debited and the rest of the blocked amount is released.
Steps to Apply Using ASBA
Using ASBA to apply is a simple process.
Step 1: Login into Net Banking Portal
Login into the online net banking portal of your bank and go to the IPO or investments section. Make sure that your bank account is linked with your demat account wherever possible.
Step 2: Choose the IPO
Select the IPO from the available list. Get familiar with the price band, lot size, issue dates and offer document.
Step 3: Submit Bid Details
Submit the number of lots and the bid price. Retail investors are allowed to bid for cut-off price wherever allowed according to the issue terms.
Step 4: Provide Demat Information
Provide your DP ID, Client ID and PAN wherever not automatically filled in.
Step 5: Confirm Your Application
Confirm your application. You will get a confirmation message either through SMS or email from your bank.
Eligibility Requirements for ASBA
For the investors who are applying for the eligible public issues, they need to use the application process mentioned in the relevant offer document and SEBI regulations. Depending on the investor category and issue structure, ASBA may be used through Self Certified Syndicate Banks (SCSBs) or via UPI wherever permitted.
Generally, the following requirements apply to the ASBA eligibility:
- Valid PAN
- Active demat account
- Eligible bank account with the Self Certified Syndicate Bank (SCSB), wherever relevant
- Available balance in the bank account to cover the application amount
- Issue specific eligibility requirements
Advantages and Drawbacks of ASBA
| Attribute | Advantages | Drawbacks |
|---|---|---|
| Safe Keeping of Funds | Application funds remain safely blocked in the bank account until the allotment process is completed. | The application may not be processed if sufficient funds are not available in the account until the allotment process. |
| Earning Interest | The blocked funds continue to earn interest as per the applicable savings account terms. | The interest earned depends on the terms and conditions of the respective bank account. |
| Funds Release | In most cases, there is no need for a separate refund transaction, as only the allotted amount is debited and the remaining blocked funds are released. | The release of blocked funds depends on the completion of the allotment process and the timelines followed by the bank and registrar. |
| Convenience | Investors can apply for IPOs directly through their bank’s ASBA facility, making the application process simpler and more streamlined. | Availability of the ASBA facility depends on the participating bank and the issue-specific application process. |
Although ASBA makes the IPO application process easy, make sure that enough funds are available in your bank account until the allotment process is over.
Who can Apply using ASBA?
ASBA facility can be used by the eligible investor categories depending on the issue terms and relevant regulations.
- Retail Individual Investors (RII): Investors who are applying for the IPO within the retail investment limits specified by SEBI from time to time.
- Non-Institutional Investors (NII): Investors who are applying for IPOs beyond the retail investor limits.
- Qualified Institutional Buyers (QIBs): Eligible institutional investors participating in the public issues.
- Employee/Shareholders Category: Applicants belonging to reserved categories wherever available.
Eligible investors must have:
- Valid PAN
- Active demat account
- Eligible bank account
- Compliance with the issue terms and conditions
Conclusion
ASBA is the standard process for application for the eligible IPOs in India as it allows the application amount to be blocked in the investor’s own bank account until completion of the allotment process. This process eliminates the separate refund handling process and allows an organized application process as per the regulatory requirements set up by SEBI.
Always remember that it is necessary to go through the Red Herring Prospectus (RHP) of the issue before making any investment in IPOs.
Final Take
ASBA neutralises the fear of missing refunds by keeping your capital safely in your own bank account until shares are allotted.
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Frequently Asked Questions
Is the money credited immediately in ASBA?
No. The application amount is blocked and stays in your bank account. The blocked amount may keep on earning interest as per the savings account terms. The amount is debited only in case of allotment.
Can I use ASBA via net banking?
Yes. Most eligible banks allow ASBA via their online net banking portals. Investors need to follow the relevant application process prescribed by the bank.
What is the difference between ASBA and UPI?
Under the eligible retail IPO applications, UPI is used to authorize the blocking of the funds, while traditional ASBA applications are submitted through the Self Certified Syndicate Bank (SCSBs). The application process depends on the issue and the investor category.
Which banks provide ASBA?
The banks that are recognized as Self Certified Syndicate Banks (SCSBs) by SEBI provide the ASBA facility. Investors can check the latest list from the official SEBI website.
Does ASBA improve IPO allotment chances?
No. The ASBA process has no impact on IPO allotment. Shares are allotted in accordance with the regulatory requirements and basis of allotment of the issue.
Does the whole bank account get blocked?
No. Only the application amount corresponding to the IPO bid gets blocked. The rest of the amount stays available for normal banking transactions.
Can ASBA application get rejected?
Yes. The ASBA application may get rejected due to insufficient funds, wrong application details, invalid PAN or demat information, duplicate applications where not allowed, or failure to comply with the issue requirements.
Can I use ASBA for every IPO?
The application process depends on the relevant public issue and the SEBI regulations. Investors need to refer to the offer document for further information.
What is Self Certified Syndicate Bank (SCSB)?
Self Certified Syndicate Bank (SCSB) is the bank recognized by SEBI for accepting ASBA applications and blocking the application amount in the investor's bank account during the IPO application process.
