Sharekhan Blog

What is ASBA?

  • Apr 1, 2024

Since 2016, SEBI has made filling out an ASBA IPO form a requirement if you want to invest in an IPO. In this blog, we’ll explore about ASBA in detail.

ASBA Meaning

SEBI created the Application Supported by Blocked Amount (ASBA) IPO application process. This application includes permission to freeze the applicant's funds in the bank account in order to subscribe to an initial public offering (IPO). The blocked sum is not available for use in any way. You can still accrue interest on the blocked amount. To invest in an initial public offering (IPO), you must apply through ASBA if you are a non-retail investor.

If you apply through ASBA as an investor, your funds are only taken out of your bank account if your application is chosen for allocation. In the event that the IPO issue is withdrawn or you do not receive it, it is returned to your bank account. As of 2016, completing an ASBA form is a requirement set by the SEBI for those interested in investing in initial public offerings (IPOs).

What Are the Benefits of ASBA?

1. Saves Time and Effort

In the days before ASBA, investors had to physically visit banks or complete time-consuming paperwork. Investors save time and effort because the full process is done online with ASBA. They can quickly apply for an IPO from the convenience of their homes or offices.

2. No Risk of Rejection

The application money under ASBA stays in the investor's account until share allotment, lowering the possibility of rejection for lack of funding. An investor will be informed and given the opportunity to address any errors if they provide wrong information or do not have sufficient funds in their account.

3.Interest on Blocked Amount

Unlike previous systems, in which the money stayed dormant, the blocked sum under ASBA earns interest. In other words, while they wait for share allocation, investors can still profit from their investment.

4.Flexibility in Payment

Investors have the flexibility to modify or cancel their bids until the bidding period is open. They can also revise their bids in case of any changes in the price band.

5.No Hassle of Refunds

If an investor withdraws their bid or their application is denied, the blocked payment will be released immediately and hassle-free. Investors save time and work by doing this.

What are the Eligibility Criteria for ASBA?

The SEBI criteria determine who is eligible for ASBA. The requirements for people to be eligible for ASBA include

1. Being an Indian resident

2. In order to participate in the ASBA procedure, the investor must have a Demat account with a depository participant (DP) and a valid PAN Card.

3. The investor must have a current, legitimate bank account with a Self-Certified Syndicate Bank (SCSB), which participates in the ASBA process.

4. Additionally, the investor's bank account balance must be high enough to cover the bid amount.

5. Fulfilling any additional requirements set forth by SEBI or the IPO's issuer.

How to Apply for ASBA Online and Offline?

Online

1. Click "IPO Application" after logging into your Netbanking account.

2. You have the option to indicate up to three bids and choose the specific IPO you want to apply for.

3. After entering your Demat account information, place and confirm your orders.

4. Your bank account is deprived of the bid amount until the allocation is completed. You will nevertheless keep receiving interest in it.

Offline

1. From the websites of the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), download the ASBA form.

2. Complete the form with the necessary information and turn it in to the Self-certified Syndicate Banks with a photocopy of the necessary identity documentation.

3. Following your application submission, the bank will block the designated bid amount in your bank account and forward the application information to the stock market.

4. The application status is available on the BSE and NSE websites.

How to Avoid Rejection of IPO Application?

You may use the following advice to make sure your application is submitted successfully:

1. A single IPO may only use one PAN ID. If you attempt to apply for the same IPO with the same PAN more than once, your application will be rejected.

2. You can only submit an application for up to three bids as an investor.

3. Your bank account should be adequately funded.

4. It is imperative that you accurately complete the application form.

5. Your application may be rejected if the details in your Demat account do not match the PAN.

The Bottom Line

Keeping abreast of the industry's most recent developments and procedures is crucial for investors. Applying for initial public offerings (IPOs) is now easier and more efficient with ASBA. So go ahead and use ASBA to investigate your investing alternatives.

Team Sharekhan
by Team Sharekhan

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