The acronym ASBA stands for “Application Supported by Blocked Amount.”
It is an IPO application process that SEBI has developed.
It is an application that has the authorization to block the application’s money in the bank account so as to apply for an IPO.
What is an ASBA?
- ASBA stands for Application Supported by Blocked Amount.
- The specified amount for an IPO will be blocked in your bank account and you will not be able to use this amount for any other purpose.
- But you can still continue to use the interest that you will earn from the blocked amount.
- If you are a non-retail investor and wish to invest in an IPO, then it is mandatory to apply through ASBA.
- If you are applying for an IPO through ASBA, your money will be debited from your bank account but only if your application is selected for allotment.
- This amount will be refunded to your bank account if you do not get the IPO issue or if the issue has been withdrawn.
- If you want to invest in an IPO, you must fill out the ASBA form starting in 2016.
Eligibility criteria for ASBA:
The following are the eligibility criteria for ASBA:
- You should be an Indian residential investor.
- You should have a valid PAN number along with a Demat account and a trading account.
- You should not bid in any of the reserved categories.
- You should have an adequate balance in your bank account.
- You will have to apply through the blocking of funds in the bank account with Self-credited Syndicate banks.
- You will have to bid at cut-off with a single option of the number of shares to bid for.
- You should also agree to the terms and conditions of not revising a bid.
How to apply for ASBA?
You can apply to ASBA in two ways:
Online ASBA Application:
- Here, you will have to log in through your net banking account and then click on “IPO Application”.
- Then you will select the particular IPO that you wish to apply for and then mention up to 3 bids.
- Later, fill in your Demat account details and then place and confirm your orders.
- The bid amount will then be blocked in your DEMAT account until your allotment is finalized, but you will continue to earn interest on it.
Offline ASBA Application:
- Here, you will have to download the ASBA form from the website of the NSE or BSE.
- Then, you will have to fill in the required details and submit the form at the self-certified Syndicate bank along with the photocopy of your required identity proof.
- After you submit your application, the bank will then send the application details to the stock exchange and then block the stipulated bid amount in your bank account.
- Lastly, you can check the application status on both the BSE and NSE websites.
Benefits of ASBA:
The following are the main benefits of ASBA:
- When the money is blocked in your bank account, you will not lose interest in it, but you will still be able to earn interest on the blocked amount.
- The blocked amount will be considered while calculating the average quarterly balance in the account.
- ASBA will eliminate the need to pay money via cheques and demand drafts.
- The facility of ASBA is hassle-free and does not involve any cost. You can easily apply via net banking without submitting any sort of physical documentation.
- The investors will not have to worry about the refunds. In the event of no allotment, the money will be unblocked from your bank account for further use.
Circumstances that will result in the rejection of the online IPO application:
The following are the main circumstances:
- If there is any sort of name mismatch on your PAN with that of the name in the application form or Demat account.
- If you do not have enough funds in your bank account.
- The information furnished by the applicant is incorrect.
- If there are multiple applications from the same PAN number.
We hope that the above blog has given you an idea of what ASBA is.
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Frequently Asked Questions (FAQs)
Answer: ASBA stands for "Application Supported by Blocked Amount."
Answer: Yes, you can withdraw till the issue is open.
Answer: ASBA funding will be directly through banks, whereas for UPI, you will need a separate UPI ID.
Answer: The main banks in ASBA are: Axis Bank, Central Bank, Bank of Baroda, etc.
Answer: Yes, ASBA is mandatory for IPO on or after January 1, 2016.