Previously, applying for an IPO (Initial Public Offering) in India was a bother. It wasn’t easy filling out long documents, sending cheques, and waiting for reimbursements! Thankfully, SEBI (the Securities and Exchange Board of India) introduced a game changer in 2008: ASBA, or Application Supported by Blocked Amount. This innovation has made IPO applications more convenient, faster, and transparent for investors like you and me. Let us break it down!
What is ASBA?
ASBA is a process through which, an investor can apply for IPOs and FPOs that do not require any upfront payment. Rather than transferring the application money to you or to the third party, it credited or debited your bank account, but they just freeze or lock the amount. The fees can only be debited when you are issued with shares of stock in the company. If you don’t get any shares the funds are just unblocked and are free for you to do whatever you want with them.
Open an account with Angel One– Click here
Why Was ASBA Introduced?
Before ASBA, the IPO process was tedious and riddled with issues:
- Originally applicants were expected to pay the application amount through cheques.
- If shares were not allotted the refunds took weeks.
- The waiting period was effectively a no-interest bank account into which one put money and from which would get nothing.
ASBA fixed these problems by making the process online and directly from your banking account. Not only do I received interest on my funds when deposited and blocked but there’s no nuisance of refunds anymore.
How Does ASBA Work?
Application Submission:
IPOs are compensated by getting the end trader submit his/her IPO application to any Self-Certified Syndicate Bank (SCSB).
Fund Blocking:
On approving your application, the bank sets a lock on the amount you have stated in your application.
Details Upload:
Your application details are uploaded onto the bidding platform by the bank (NSE/BSE).
Allotment Process:
If you are issued with shares, blocked funds are then charged. Otherwise the funds are unblocked.
Benefits of ASBA
- No Refund Hassles where your money is not used until shares are allotted to you.
- Money which is blocked in your bank account earns interest.
- The application process involved using online banking from your bank’s website or through a mobile application. No more cheques or demand drafts.
- It is a secure system, and there are rules in following KYC standards about customers.
- During the IPO bidding period you can still make some changes or even withdraw your application.
Drawbacks
- You should have an account with SCSB to apply.
- If your bank doesn’t offer online ASBA, you’ll have to visit the branch.
- Incorrect details in your application (like a typo in your Demat account number) can lead to rejection.
Open an account with Angel One– Click here
Steps to Apply for an IPO via ASBA
Offline Method:
- A printed copy of the ASBA form can be downloaded from the BSE or NSE website.
- More fields to be filled are name, PAN, Demat account number, and the amount you want to bid.
- Fill this form and send the completed form to your SCSB branch.
Online Method:
- Simply if you are using your net banking then just enter into your account.
- Choose the application for an IPO option.
- Input your data and put the bid.
Pro Tip: Check your information to avoid rejection
Conclusion
ASBA is a convenient, efficient and easy way to apply for an IPO. It puts you in control of your funds and eliminates the need for cheques and tedious refunds. Whether you’re a seasoned investor or a newbie, ASBA helps to make the IPO process easy and worry free.
If you found this post useful, please comment “useful”. And I request you to Please share this post on Facebook/WhatsApp with those who need this.