ASBA stands for Application Supported by Blocked Amount. The amount applied is blocked in the investor’s bank account until the allotment of shares has been completed as part of the procedure utilised in India for applications to Initial Public Offerings (IPOs) or rights issues. Only if the investor receives their shares will their account be debited during this process. The money is returned to the investor’s bank account if the allotment still needs to be completed.
The ASBA platform has made it simple and free to apply for an IPO through the SCSB (Self-certified Syndicate Bank), which has substantially improved process efficiency. After completing the application form, investors only actually send money once the allocation has been decided. Until then, they can utilise their remaining funds as they see fit and continue to accrue interest.
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How to Apply for an IPO through ASBA?
The following is a step-by-step process to apply for an IPO through ASBA in India.
- Go to a bank or stockbroker that takes part in the ASBA process and open a checking or savings account.
- Get the IPO application form from your bank, the issuing company’s registrar, or both. Include all necessary information on the application form, such as your PAN number, the number of shares you want to apply for, and your bank account information.
- Give the bank permission to hold the necessary funds in your account for a block of time. The entire cost of the shares you seek will be the amount blocked.
- Send your bank the completed form and a check for the necessary amount. The bank will confirm the information and block the money in your account if everything is correct.
Watch for the allocation procedure to be finished. If your request is approved, the bank will release the funds from your account and credit the shares to your free Demat account. However, the bank will release the blocked money and refund it to your account if your application is denied. As the allotment of shares is based on a lottery or a first-come, first-served basis, as determined by the issuing business, applying for an IPO through an ASBA application does not ensure that you will receive any shares.
Advantages of Applying through an ASBA Application
When applying for Indian IPOs (Initial Public Offerings), there are benefits to employing ASBA. These are:
- No prior payment is necessary with ASBA since there is less chance that your money will be misappropriated, as the funds are stopped in your bank account rather than remitted to the issuing firm.
- Refunding is quick and simple, since, in the event that your application is denied, the blocked funds are promptly transferred back to your bank account.
- By using your current bank account to apply for IPOs through ASBA, you can avoid opening a new account or moving money to another account.
- You have more control and transparency because you can check the progress of your application and determine in real time whether your funds have been stopped or released.
- Lack of paperwork in ASBA decreases the possibility of misplaced or damaged application forms.
- ASBA enables IPO applications to be processed more quickly than with physical forms, shortening the time it takes to get an allocation or a refund.
- Using ASBA lessens the possibility of fraudulent activity like faking IPO applications or money laundering.
ASBA Eligibility Requirements
Some of the requirements for ASBA eligibility are:
- You are a residential investor from India.
- You possess a valid PAN number, along with a Demat account and trading account.
- You must submit an application by blocking money in a Syndicate Bank account that you have self-certified.
- It is necessary to maintain a sufficient balance in your bank account for ASBA participation.
- When participating, you are required to bid at the cut-off price and select a single option for the number of shares to bid for.
- Bidding under any of the reserved categories is not permitted.
- As an investor, you must agree to the terms and conditions, including the commitment not to revise a bid.
