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Knowing what is ASBA and the role it plays in the IPO process is crucial. In simple terms, ASBA has helped transform the way retail investors apply for IPOs. Under this, you do not transfer the money in advance and wait to get it back in case units are not allotted. Instead, the money is blocked in your bank account and is automatically released if the units are not allotted. This enhanced trust and simplified the process.
Key Takeaways
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ASBA blocks IPO funds in your bank account; money is debited only after allotment.
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It reduces refund delays, prevents misuse of funds, and allows interest to continue on blocked amounts.
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Applications require accurate PAN, demat, and bank details to avoid rejection.
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Investors can apply online or offline through authorised banks or use UPI as an alternative route.
What is ASBA?
ASBA, short for Application Supported by Blocked Amount, is one of the IPO application procedures launched by SEBI in 2008 to make subscribing easier. In the past, shareholders wrote cheques and waited months for refunds when shares were not assigned. A simple answer to , application funds are not withdrawn and transferred to the issuer; instead, they remain in your bank account but are blocked.
Under ASBA, you keep the money in your account, and it is debited only when shares are allotted. This helps applicants avoid loss of interest income and minimise misuse of funds in the interim.
How Does ASBA Work?
ASBA is carried by an authorised bank, in the form of a Self-Certified Syndicate Bank, providing the service. When you apply for an IPO with ASBA, you fill in with bid information either with your bank or on an online site. The bank places a hold on the funds from your application. In the event of share allotment, the required amount is debited. Otherwise, the blocked amount is released. This system eliminates refund delays and keeps the funds under the investor's control.
Benefits of ASBA:
Here are some unique benefits of ASBA.
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In the ASBA application, the bank blocks the money in your account, and you continue earning interest on it.
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The ASBA application process is paperless and has eliminated the need to write cheques/demand drafts.
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It is hassle-free and doesn't involve any cost. Individuals can apply using Netbanking without submitting any documents.
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It has made the refund process transparent. If you aren't allotted IPO shares, the SCSB unblocks and releases the money to your account.
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The blocked amount is considered in calculating the Average Quarterly Balance in the account.
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ASBA prevents the IPO issuer from using the funds before allotting the shares
Detailed ASBA Application Process:
You can avail the ASBA facility both online and offline.
Offline Method of Using the ASBA Application:
Here are some of the steps to apply for ASBA offline.
Download: The ASBA form is available on the BSE and NSE websites for download. You can also obtain a physical copy from designated bank branches or through your stockbroker.
Fill out the details like
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Name
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PAN card details
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Demat account number
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Bid quantity
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Bid pride
Bank account number and Indian Financial System Code (IFSC)
Submit the form at the Self-certified Syndicate Bank and collect the acknowledgement receipt. It allows your bank to block the amount in your account. The bank will upload the details to the bidding platform. Investors should ensure that the details in the ASBA form are correct to avoid it from getting rejected.
Online Method of IPO Application Using ASBA Facility
The online application system is simple and fast. Here are the steps below.
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Log in to your net banking portal and click on the Investment or IPO section.
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Choose “Invest in IPO” from the list of options available.
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You will be redirected to the IPO application platform, where you can select the active IPO you wish to bid for.
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You will need to fill in the basic details like name, PAN, bid quantity, bid price, and your 16-digit Demat account number (DP ID + Client ID).
After applying for the ASBA IPO, you can check the application status on the NSE, BSE or the Registrar’s (e.g., Link Intime or KFintech) websites.
IPO Application Process Through UPI: An ASBA Alternative
Retail investors bidding up to ₹2 lakh can use UPI to bid for IPOs. Here are the steps:
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Log in to the client portal of your broker's website or mobile app. There, you will find an option to apply for an IPO online.
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Select the IPO you want to bid for.
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In the bidding window, enter your quantity and price (or select 'Cut-off Price').
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In the UPI details window, enter your valid UPI ID (mapped to your own bank account).
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You will get a Mandate/Block request on your UPI app. Accept the request by entering your UPI PIN to complete the bidding process.
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You will receive SMS and email notifications that your application is successful once the exchange confirms the bid.
Cause of IPO Rejection and How to Avoid It
Situations that can lead to IPO application rejection
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If you do not have sufficient clear funds in your account at the time of the block request.
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If the information furnished in your application is wrong (especially the 16-digit Demat ID).
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If there is a mismatch in your name, PAN card details, and the information in your Demat account.
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Multiple applications using a single PAN card for the same IPO.
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Third-party applications (where the name on the bank account does not match the name on the Demat account).
Important points to note to avoid rejection of IPO application
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Once you have submitted the IPO application, the amount will be blocked in your account. So, you will not be able to use the funds for other needs until the allotment process is complete or the block is released.
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You can apply for one IPO using one PAN per category. Your application will get rejected if you use the same PAN to apply for the same IPO multiple times (even through different banks).
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Under ASBA, investors can enter up to three bids within a single application (this is known as multiple bidding to choose the best price, but you only pay for the highest bid value).
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The bank account holder's name must match the name on the Demat account. Using a friend’s or relative’s bank account for your PAN application will lead to rejection.
Eligibility Criteria for Using ASBA
To use ASBA, certain conditions must be met. The investor must have a valid PAN and must be a resident Indian. The investor should also have a bank account in a Self-Certified Syndicate Bank (SCSB) authorised to provide ASBA services. NRIs can invest using ASBA if their NRE or NRO account is with an SCSB bank.
A demat account is also required, as the shares are electronically credited. The bank account should also have an adequate balance to sustain the amount of the application. The investor has to give the correct demat and bank information. Applications may be made by joint account holders whenever all names are identical to the demat records. Under ASBA, compliance with the norms of KYC will be required to ensure smooth processing.
Can You Cancel the ASBA Application?
Individuals can withdraw the ASBA application anytime till the issue is open for bidding. So, if an IPO bidding window remains open for three days, then investors can withdraw the application anytime within those three days. Once you cancel the application, the blocked amount is usually made available within 1 to 2 working days, though some banks may take up to 3 to 4 working days, depending on their internal processing.
Conclusion
The ASBA application process is simpler than the previous methods and allows investors to use the funds available in the bank. It is also a lot safer and more transparent than the old, cumbersome ways. ASBA has empowered smaller and retail investors and given them more power. However, it wasn't mandatory until 2016. Now, all IPO issuers have to offer an ASBA application facility.
