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Applying for hot new IPO share listings can be tedious – struggling with paperwork, making upfront payments without clarity on the allotment, and chasing refunds. But there is a better way now! The ASBA helps investors conveniently subscribe to public issues without all that hassle. This application method has made the process smoother for retail and institutional investors.
Read on to learn everything about how ASBA in IPO makes investing easy. In the section below, we’ll discuss everything about ASBA and its process.
What is ASBA?
ASBA full form is Application Supported by Blocked Amount. It lets you apply for IPO shares without having to pay upfront immediately. It is denoted as an Application Supported by a Blocked Amount, so the money stays blocked until you get the shares. This way, you save effort on cheques or transfers and can plan your money flow better.
Introduced by SEBI, ASBA makes applying for new share listings much quicker and easier for all investors – whether you are an individual buying a few shares or an institution investing crores. Overall, it removes the hassles and makes IPO share applications smooth and convenient.
Benefits of the ASBA facility
- Your Money Stays in Your Bank
When you apply for an IPO through ASBA, your money isn’t immediately removed from your account. It just gets ‘blocked’. So, it’s still in your account, earning interest, until you get those shares.
- No More Overdraft Headaches
With ASBA, there’s no risk of accidentally spending the money you set aside for IPOs. It’s like putting a hold on that amount in your account – visible but untouchable, preventing any overdraft issues.
- Simple Process
The process with ASBA is much smoother and has fewer chances of errors. You don’t need to worry whether your physical cheque or forms will arrive on time. You also get regular updates via email or SMS to keep you updated on what is happening.
- Faster Access to Your Money
If you don’t get the shares, your blocked money is made available again pretty quickly. It’s much faster than the old way of staying in anticipation for a refund cheque in the mail.
- Secure
ASBA is a secure way to apply for IPOs. Your application goes directly to the stock exchange via secure banking channels, so there’s less chance of any mix-ups or security issues.
Step-by-step ASBA application process
Step 1: Check if you can invest in the IPO you want to apply for. Also, ensure you have a Demat account.
Step 2: Carefully read the offer document and research the company’s financials and future prospects.
Step 3: Identify the right ASBA bank, which could be your existing bank where you hold savings/current accounts.
Step 4: Collect the physical ASBA form from the branch or complete it online via net banking.
Step 5: Accurately fill in all the required details in the form, including the account number which must be blocked.
Step 6: Submit the form to the branch and authorise them to block the application amount from your linked ASBA account.
Step 7: After scrutinising and validating your application details, the bank will block the amount.
Step 8: The application reaches the stock exchanges through your bank for processing.
Step 9: After the share allotment, funds are unblocked or debited as applicable.
Step 10: Allotted shares are credited to your demat account.
Types of ASBA applications
- Physical ASBA – As the name suggests, you must physically fill out and submit the form at your bank branch. Old school style!
- Online ASBA: You can fill and submit the form electronically via net banking. Even the amount gets blocked online through internet banking. No need to go to the branch.
You can also use the UPI handle linked to your bank account to block funds.
So go for online ASBA if you want to skip the documentation and visit the bank. Do it digitally and get it done in minutes!
Who can apply via ASBA?
- Retail investors like you and me applying for shares worth up to ₹2 lakhs
- High net worth individuals or HNIs who apply for above ₹2 lakhs worth of shares
- Institutional investors such as mutual funds, banks, financial institutions, etc.
- Companies’ shareholders who apply through reservation quota
So whether you are a small retail investor or a big HNI, you can apply ASBA to IPOs of unlisted companies in India. It makes the process easier across investor classes.
Conclusion
ASBA has made applying for IPOs a smooth, convenient and transparent process for retail investors. Eliminating upfront payments and physical paperwork significantly reduces the hassles involved. The ability to block funds rather than pay immediately provides safety and flexibility to investors. Real-time application status tracking also enables complete visibility of the process. With its multiple benefits around ease of use, safety and speed, ASBA has emerged as the preferred route for investors to subscribe to initial public offerings.
FAQs
ASBA stands for Application Supported by Blocked Amount. It is where a certain amount is blocked in your bank accounts while applying for an IPO.
Investors must create an ASBA-enabled bank account. While filling in the IPO application form, all the details about the ASBA account, including the amount to be blocked for the IPO must be mentioned. Based on this, the amount specified is blocked in the investor’s account. If the shares are allotted, the amount blocked will be debited, otherwise, it will be unblocked.
Besides the rules for obtaining the application form, here are some points to keep in mind:
Ensure all your details, PAN, and account numbers match perfectly with supporting documents.
Submit the ASBA form only at the branch where you hold the account to be blocked.
Ensure the same amounts are filled in the form and requested to be blocked.
Ensure your bank account is enabled for ASBA before applying.
Ensure you have adequate funds in the account when blocking the request.
To apply for ASBA offline, download the ASBA form from the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) websites. Complete and submit the form along with a photocopy of your identity proof at a self-certified syndicate bank. After submission, the bank will forward your ASBA application details to the stock exchange and block the specified bid amount in your bank account. You can track your application status on both the BSE and NSE websites.
Yes, ASBA is mandatory for IPOs. In January 2016, the Securities and Exchange Board of India mandated investors to apply for IPOs through the ASBA process.
The process of ASBA was introduced in 2008. Prior to that IPO applications required cheques and demand drafts. Once the applications were submitted, the corresponding amount would be debited from their bank accounts.
The allotment process would commence two months after submission. Companies would subsequently dispatch physical copies of share documents to the allotted shareholders. Those who did not receive any allotment would have their funds refunded through courier services.
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