What is ASBA? A simple innovation to help investors save some paperwork & money. With the advancement in processes & technology, ASBA has become a very popular tool subscribe for IPO, NFO or NCDs. If you are still writing cheques for these and losing interest till the new scheme opens, you need to learn – What is ASBA facility? Go ahead and see how cheques no longer required.

What is ASBA?

ASBA means “Application Supported by Blocked Amount”.

ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an issue.

If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized.

It is a supplementary process of applying in Initial Public Offers (IPO), New Fund Offers (NFO) by Mutual funds & Non-Commercial Debentures (NCD) or Bonds issued by Financial Institutions. It is also used while applying for right issues and Follow on Public Offers (FPO) made through book building route and co-exists with the current process of using cheque as a mode of payment and submitting applications.

Benefits of ASBA

The investor need not pay the application money by cheque rather block his / her bank account to the extent of the application money, thus continue to earn interest on application money.
The investor does not have to bother about refunds, as in ASBA only an amount proportionate to the securities allotted is taken from the bank account when his / her application is selected for allotment after the basis of allotment is finalized.
The application form is simpler.
The investor deals with the known intermediary i.e. his or her own bank.
No loss of interest, since the application amount is not debited from the savings account on application.
Customer can revise/withdraw the bid before the end of the Issue in the prescribed format with the Bank.
Helps to maintain or increase Monthly or Quarterly Average Balance.

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Eligibility Criteria for Using ASBA

First of all your bank should be a member of Syndicate Banks (Most of the banks are). These are Self-certified Syndicate Bank (SCSB). SCSB is a bank recognized by SEBI as a bank which is allowed to provide ASBA services to customers.

You can check if your bank is part of SCCB list in SEBI’s Website Here. This is the bank list for ASBA.

SEBI has also specified the investors who can apply through ASBA.

In public issues with effect from May 01, 2010, all the investors have been applying through ASBA. In rights issues, all shareholders of the company as on record date are permitted to use ASBA for making applications provided he/she/it:

is holding shares in dematerialized form and has applied for entitlements or
has additional shares in the issue in dematerialized form;
has not renounced its entitlements in full or in part;
is not a renouncee;

who is applying through blocking of funds in a bank account with the Self Certified Syndicate Bank (SCSB).

An “ASBA investors”, at the time of submitting ASBA application should provide correct information related to:

PAN
DP ID
Client ID
Bid quantity
Bank account number

Can NRI invest through ASBA?

Yes, they can do so from their NRI or NRO Account.

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How to apply for ASBA?

Application forms for Application Supported by Blocked Amount is part of the form for Equity or NCD.

In Mutual Funds, a separate form, supplementary to the main form can be used.

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In fact, it is the duty of MF, syndicate members in an IPO to provide ASBA form to the investor.

Application Supported by Blocked Amount for Online Subscriptions

Nowadays, since you can apply online for most of these new issues, you can use ASBA here also. Generally, when you apply, this option appears on the online form screen and the user just need to click it to avail this facility.

So ASBA is the future.

Hope you liked this piece on- What is ASBA ? If you are not using it, start using it as it is very easy to implement and understand. Ask me if there is a slightest of hesitation by using the comments section below.