Skip to main content

Application supported by blocked amount (ASBA) process and IPO

This article explains how this process makes it easier for investors and obviates the need to block funds unnecessarily


   Application supported by blocked amount (ASBA) is a new investor-friendly way to apply for initial public offerings (IPOs). ASBA is an interface for banks to participate in the process of IPO payments as proposed by the capital markets regulator, the Securities and Exchange Board of India (SEBI). The objective of introducing ASBA is to ensure an investor's funds leave his bank account only on allotment of shares in public issues.

   The ASBA process also ensures that only the required amount of funds is debited to the investor's bank account on allotment of shares. In this mechanism, the need for refunds is completely obviated.

   The banks participating in an IPO process can upload the bids with respect to their customers into the electronic books of BSE and NSE. The interface facilitates not only the controlling branch but also the designated branches of the banks to directly upload the bids into the electronic books.

   ASBA provides an alternative mode of payment in issues whereby the application money remains in the investor's account till finalisation of basis of allotment in the issue. The process facilitates individual investors bidding at cut-off, with single option, to apply through self-certified syndicate banks (SCSBs), in which the investors have accounts. SCSBs are banks that meet the conditions laid down by SEBI.

Role of SCSB


• Accept application

• Verify application

• Block funds to the extent of bid payment amount

• Upload the details on the web-based bidding system of the exchange

• Unblock once the basis of allotment is finalised

• Transfer the amount for allotted shares to the issuer This will co-exist with the current procedure of investors applying through sub-syndicate and syndicate members, with a cheque as a payment instrument. The ASBA is an application containing an authorisation to block the application money in the bank account to subscribe to an issue. If an investor is applying through ASBA, his application money will be debited from the bank account only if his application is selected for allotment after the basis of allotment is finalised, or the issue is withdrawn.


   Under the ASBA facility, investors can apply to any public or rights issues by using their bank account. Investor have to submit the ASBA form (available at the designated branches of banks acting as SCSB) after filling in details such as name, PAN number, demat account number, bid quantity, bid price and other relevant details to the branch with an instruction to block the amount in their account. In turn, the bank will upload the details of the application in the bidding platform. The investor should ensure the details that are filled in the ASBA form are correct. Otherwise, the form is liable to be rejected.
   

Applying through ASBA facility has these advantages:

No need for cheque payment    

The investor need not pay the application money through a cheque. He has to submit the ASBA which accompanies an authorisation to block the amount in the bank account - to the extent of the application money.

Refunds don't arise    

The investor does not have to bother about refund, as in ASBA only that much money - to the extent required for allotment of securities - is taken from the bank account, only when his application is selected for allotment after the basis of allotment is finalised.

Interest ensured    

The investor continues to earn interest on the application money as it remains in the bank account, which is not the case in other modes of payment.

Simple form    

The application form is simpler. The investor deals with a known intermediary - his own bank. An investor who is eligible for ASBA has the option of making an application through the ASBA, or through the existing facility of applying with a cheque.

Bid can be withdrawn    

An investor can also withdraw the ASBA bid. During the bidding period an investor can approach the same bank to which he had submitted the ASBA and request for withdrawal through a signed letter citing his application number.


   After the bid closure period, he can send his withdrawal request to the registrars before the finalisation of basis of allotment, and they will cancel the bid and instruct the SCSB to unblock the application money in the bank account after the finalisation of basis of allotment.

 


Popular posts from this blog

Gold: What Can Trigger the Inevitable?

A stronger dollar or rising interest rates could derail the epic yellow metal mania   Before you sell that last piece of jewellery, keep in mind that the gold price will not go up indefinitely. There are number of reasons why it might crash. If you're over weighted in gold or commodities, the warning is the same: A stronger dollar, strengthening US economy or rising interest rates could derail the epic yellow metal mania. Who knows? Congress could even reach an agreement to clear up its balance sheet and pay down its debt. What are the chances of any of this happening? It's beyond the limits of my minuscule, clouded crystal ball, which is about the size of a pin-head.   Nevertheless, you should prepare your portfolio for any number of eventualities, which can be easily accomplished with exchange-traded funds. Gold is troublesome in my book because it really isn't an investment. It's a reserve currency of sorts that's heavily traded by institutional investor...

What is Statutory Liquidity Ratio - SLR?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 What is Statutory Liquidity Ratio - SLR ?   Last week, the RBI cut statutory liquidity ratio ( SLR ) by half a percentage point to 22.5%, effective June 14. By this, the central bank intends to release additional money into the banking system. SLR is the amount of funds that every commercial bank should have either through its holdings in government approved bonds and securities, gold or a combination of these assets. This is another way of ensuring enough liquidity for each bank before they lend to customers. By reducing SLR, the RBI released another half a percentage point of commercial banks' total deposits (in banking parlance, total demand and time liabilities that include FDs, savings and current accounts) to be free ...

7 Things You Should Look for in a Financial Planner

Recently, a new breed of professionals has emerged who are making financial plans for everyone and are not restricting themselves to investment planning. A financial plan includes planning for your taxes, retirement, kids' education and marriage, buying a home, estate planning or any other goals you may have. This new breed of professionals, known as financial planners, writes a plan for you with all your goals specifically laid down and then provides you with a road map on how to achieve these goals. They always give you a holistic account of all your finances, taking into account all your assets and liabilities, besides taking care of all the risks associated with you and your family and also the assets owned by you. These financial planners will first collect all the data related to your finances and the goals you have for future. These goals may be anything ranging from buying a home, to planning for your child's education to going on a vacation. After this exercise of d...

ASBA Option for Initial Public Offer (IPO)

IPO (initial public offering) applicants, particularly the unsuccessful ones, often have to face a double whammy of sorts. On the one hand they fail to get allotment of shares and on the other, they lose out on the interest during the period their money is locked —that is, if they have opted for the traditional method of issuing cheques for depositing the application money. However, if they choose the ASBA (Application Supported by Blocked Amount) facility, they can circumvent this problem. But do note that you cannot decide to make two applications – one by way of cheque payment and the other through ASBA. If you do so, it could be rejected on the grounds that it constitutes multiple applications. Introduced by Securities and Exchange Board of India ( Sebi ) in 2008, using ASBA has become mandatory for all non-retail investors. Retail investors, though, continue to have the option of choosing between the old and new mechanisms. However, it is in your interest to opt for ASBA. He...

Mutual Fund Review: Kotak Opportunities

    DESPITE a portfolio of around 57 stocks, a large-cap tilt and exposure to derivatives, debt and cash, it is not a fund for the cautious. True to its calling, it scouts for opportunities and doesn't hesitate in taking concentrated sector and stock bets. This leads to extreme returns. In the bull phase (June 15, 2006 to January 8, 2008), it delivered 91.26 per cent against the 81.29 per cent average of other opportunity funds. Unsurprisingly, it shed higher in the bear hug of 2008. While in the recent run up (March 9, 2009 to June 30, 2010) it delivered 85 per cent against its peers 87 per cent. Its charm lies in its capability to identify sector trends ahead of time. In 2005, it rode the FMCG wave and the move paid off. In the first quarter of 2006, it focused on metals. In 2007, its exposure to construction and metals that resulted in a superb performance. In 2008, it was overweight on the least-hit FMCG sector, which helped it get away with an average fall. More recently...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now