Applications Supported by Blocked Amount (ASBA) is an investor application process used to apply for Initial Public Offerings (IPO) in the Share Market. It allows investors to apply for IPOs without making payments upfront. Upon subscribing to securities, the application money is blocked in the investor’s account with a self-certified syndicate bank (SCSB)/designated bank.
What Are the Main Features of ASBA?
- When you opt for the ASBA facility, your bank blocks an amount equal to the value of the shares you are applying for in your account.
- Once your application is accepted, this blocked amount is utilised towards paying the subscription amount.
- The blocked amount is released into your account if your application is not accepted.
- The advantage of using ASBA is that it allows you to get an allotment of IPO In the Share Market even if you do not have sufficient funds to spare on the date of allotment.
- This is because your bank pays the subscription amount only after your application is accepted and allotment is made.
Types of ASBA-Based Process
- Offline ASBA: In this process, the investor fills up a physical application form and submits it to the bank where they hold their account. The bank verifies the details and blocks the required funds in the investor’s account.
- Online ASBA: In this process, the investor applies for the public issue through the bank’s internet banking portal. The investor has to fill up the required details, and the bank verifies the details and blocks the funds in the investor’s account.
- Mobile Application ASBA: In this process, the investor applies for the public issue through the bank’s mobile application. The investor has to fill up the required details, and the bank verifies the details and blocks the funds in the investor’s account.
- Self-Certified Syndicate Banks (SCSBs) ASBA: In this process, the investor applies for the public issue through an SCSB (a bank authorized by SEBI to collect applications and block funds). The investor has to fill up the required details, and the SCSB verifies the details and blocks the funds in the investor’s account.
- Registrar and Transfer Agent (RTA) ASBA: In this process, the investor applies for the public issue through the RTA (an agency authorized by the company issuing the shares to collect applications and block funds). The investor has to fill up the required details, and the RTA verifies the details and blocks the funds in the investor’s account.
Who Can Apply for ASBA Option?
ASBA is a facility banks provide, and investors can apply for it through their respective banks.
To apply for ASBA, investors must fill out an ASBA form provided by the bank and submit it along with the required documents and payment instrument (cheque or demand draft) to the designated bank branch. The form requires information such as the investor’s PAN number, investment amount, and bank details. The documents required for KYC may vary depending on the bank’s policies.
Detail Process Flow for ASBA Payment Option
Here is a detailed process flow for the ASBA (Applications Supported by Blocked Amount) payment option:
- Open a bank account: The first step is to open a bank account with a bank that supports ASBA payments. The investor must ensure that their bank account is linked to their PAN card.
- Apply for the public issue: The next step is to apply for the public issue of shares through the bank’s internet banking portal or mobile application or by submitting a physical application form at the bank. The investor has to provide details such as their name, PAN number, address, number of shares they want to apply for, and the amount they want to invest.
- Block funds: After submitting the application, the bank will verify the investor’s details and block the required amount in their bank account. The amount is blocked only after the bank successfully verifies the investor’s details.
- Allocation of shares: The shares are allocated to the investor after the completion of the public issue process, and the final price of the shares is determined.
- Refund of excess amount: If the investor has applied for more shares than what they have been allocated or if the final price of the shares is less than the amount blocked, the excess amount is refunded to the investor’s bank account.
- Unblocking of funds: If the investor’s application is not successful, or if they withdraw their application before the completion of the public issue process, the funds blocked in their account are unblocked and made available for use.
- Allotment confirmation: Once the allotment process is completed, the bank sends a confirmation to the investor regarding the shares allotted to them. The shares are then credited to the investor’s demat account.
To conclude, Applications Supported by Blocked Amount (ASBA) is a payment mechanism that provides a convenient and secure way for investors to apply for public issues of companies. It reduces the risk of loss due to market fluctuations and ensures faster refunds.
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