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. Here, the application money is debited from the applicant's bank account only after the shares are allotted, thus eliminating the tiresome task of waiting for the refund. To avail of the facility, you need to give an authorisation to block your application money in the bank account for subscribing to the IPO. It will be debited only after the basis of allotment is finalised. In the case of rights issue, the application money is debited after the receipt of instructions from the registrars. But not all banks are authorised to offer this facility – it can be availed of at 'Self Certified Syndicate Banks (SCSB)' only. A list of these banks and their branches can be accessed from the Sebi websites (www.sebi.gov.in), BSE (www.bseindia.com) as well as NSE (www.nseindia.com). The applicant can submit the ASBA application to the SCSB with whom he/she is maintaining the account to be blocked (to the extent of the application money) for the purpose. The application can be submitted either by filling up the form or online, by using the Internet banking facility.
You can also withdraw your ASBA application during the bidding period and even later. In case of the former, you need to approach the SCSB where the application was applied and make a withdrawal request. The bank will then unblock the amount. Post the bid closure period, you can submit the withdrawal requests to the Registrars before finalisation of basis of allotment. The registrar will subsequently instruct the SCSB concerned to unblock the amount after the finalisation of basis of allotment.
