ASBA is an acronym for ‘Applications Supported by Blocked Amount.’ It is a new way of applying for IPOs (Initial Public Offerings) and rights issues made available by SEBI (Securities and Exchange Board of India). ASBA is a convenient option for customers who want to use the internet banking facility to apply for an IPO for Online Share Trading.
For issuers, ASBA provides a cheaper and more efficient alternative to the traditional issuing of shares for Online Stock Trading. When you opt for ASBA, the amount required to subscribe to the IPO gets blocked in your bank account until the shares are allotted. ASBA essentially means that the money required to subscribe to an IPO On Stock Market or Rights Issue will be blocked in the investor’s account itself instead of being routed through a broker. This ensures that the investor does not have to pay any upfront fees to the broker and reduces the risk of fraud.
Banks ASBA Process & its Uses Over Money
Under ASBA, an SCSB can act as an intermediary between the company and the investor for collecting applications and application money. The SCSBs collect investors’ applications and cheque/debit instructions for blocking funds. The SCSBs then intimated the stock exchange about the list of applicants. Share broker for online share trading account opening with ASBA payment option!
After due verification, the stock exchange intimates SCSBs about successful applicants’ allotted shares. Finally, SCSB releases funds to the company only against valid allotment advice issued by the stock exchange, thereby ensuring that the investor’s money is utilised only for the subscription of shares.
How Long will the Customer’s Account Remain Locked?
If the customer’s account remains locked for the entire ASBA payment process, it could take anywhere from a few days to a few weeks for the funds to be released into the customer’s account. The length of time will depend on how long it takes for the bank to receive and process the necessary paperwork.
What Happens If the Investor Doesn’t Receive the Allotment?
If the investor does not receive the allotment, the banks will need money in the customer’s account to lock in the ASBA payment option. The banks will also refund the application money to the extent of a shortfall in the required margin amount.
When Can An Investor Withdraw IPO Application?
An investor can withdraw an IPO application at any time up to the closing of the IPO Stock Market. However, after the IPO closes, the investor’s money is committed to purchasing shares and cannot be withdrawn. Specifically, IPO applications can only be modified or cancelled on trading days between 10:30 AM and 4:30 PM.
End Notes!
ASBA minimises the risk of fraud, as only authorised banks can block funds in customer accounts. In addition, it helps eliminate the need for upfront fees to share brokers for online means. Shoonya’s trading app offers a simple and convenient platform that makes it easy to carry out the ASBA-based Process. All you need to do is log in to your account, select the IPO Share Market that you wish to apply for, and enter the amount of money you wish to invest. The app will then take care of the rest, blocking the required amount from your bank account and making the application on your behalf.