What is ASBA? – A Detailed Guide

One of the reasons investing in IPOs have been gaining popularity among retail investors is because of the convenient process provided by ASBA. Are you wondering what is ASBA and how can you invest in an IPO with the ASBA method, then this article is for you. In this article:
  • What is ASBA?
  • Why was ASBA introduced?
  • How does ASBA work?
  • Detailed procedure of applying for an IPO through ASBA
  • Most important points to note about an IPO application
  • Eligibility criteria for ASBA
  • Benefits of using ASBA

What is ASBA?

ASBA stands for Application Supported by Blocked Amount. It was introduced by the Securities and Exchange Board of India (SEBI) in 2008. It is a process which helps to apply for any ongoing IPO with ease. In this process, you instruct your bank to block the application amount in your bank account itself. If you get an allotment, the amount is debited from your bank account or else, its unblocked. Now that you know what is ASBA. Let’s move ahead and understand why ASBA was introduced. Recommended watch: What is ASBA?

Why was ASBA introduced?

In the 1990s, investors would apply for IPOs at a fixed price through cheques and demand drafts (DD). They had to stand in long queues outside the designated bank branches to submit their forms. After submitting the application, the amount was immediately debited from their bank accounts…but the allotment of shares took almost two months. For these two months, the company coming up with an IPO would invest this accumulated money and earn massive interest on it. In case of an oversubscribed IPO, refunds would be couriered back to millions of investors. Many of these were lost in transit which resulted in complaints. Moreover, it would take nearly three months to get the physical share certificate by post. To solve these problems, StockInvest was introduced in 1993 and prevailed for a decade. It was like today’s ASBA facility.  The system was designed in a way that the amount would be debited only if shares were allotted to you. But because of fraudulent practices, the system was banned by the Reserve Bank of India (RBI) in November 2003. To overcome such a chaotic scenario, ASBA was introduced and is linked with your bank account. It is considered safe as banks go through a strict Know Your Customer (KYC) process. So, ASBA is a safer and reliable source to apply for an IPO online.

How does ASBA work?

ASBA is a simple application through which you instruct your bank to block funds for a particular IPO. Remember, this application amount is not debited from your account but temporarily blocked. So, you continue to earn interest on this amount. The blocked amount is debited only if shares are allotted to you. The shares are then transferred to your Demat account before listing. But what if you had applied for 500 shares and you get an allotment for only 250 shares.  Well, this is called partial allotment. Here, only amount equal to 250 shares will be debited and the unused amount gets unblocked. Please note that all banks don’t offer ASBA facility. Only Self-Certified Syndicate Banks (SCSBs) are allowed to provide ASBA facility. To find the list of SCSBs registered with SEBI – Click here

Detailed procedure of applying for an IPO through ASBA

ASBA facility can be availed online and offline.

1. Offline IPO Application using ASBA facility

Investors who wish to apply for an IPO offline must follow these steps:
  1. Download the ASBA application form, which is available on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) websites.
    1. For NSE – Click here
    2. For BSE – Click here.
  2. Fill in the necessary details like:
  • Name of the applicant
  • PAN number
  • Demat account number
  • Bid quantity
  • Bid price
  • Bank account number and Indian Financial System Code (IFSC code)
Submit the form at your SCSB branch and collect the acknowledgement receipt. By doing so, you are instructing the bank to block the application amount in your account. Later, the bank will upload the details of the application on the bidding platform. Investors should ensure that the details filled in the ASBA form are correct as wrong data may lead to rejection of application

2. Online IPO Application using ASBA facility

1. First of all, you have to log-in to your net banking portal and click on the net-banking option. 2. From the list of available options, click on IPO Application. 3.    You will be redirected to the IPO online portal where you need to fill all the basic details such as name, PAN number, bid quantity, bid price, 16 digit DP ID and submit the application. If you have already applied for an IPO using ASBA facility, then you can check the application status on the following links. Another way of applying for an IPO online in less than two minutes is through UPI.

Let’s look at the simple procedure of applying for an IPO through UPI.

  1. Log in to the back-office application provided by your broker. Here you will find the option of applying for an IPO online.
  2. Select the ongoing IPO you wish to apply for.
  3. In the bid entry window, the minimum lot size will be set at default. You need to change the bid quantity and cut off price as per your preference.
You can change the bid quantity as per multiples of the lot size. For the bid price, it is recommended to select cut off price. This may increase your chances of getting an allotment in the IPO. [Recommended Read: 10 must know tips and strategies for investing in an IPO
  1. Check the total amount, enter your Virtual Payment Address (VPA) or Unified Payments Interface ID (UPI) and submit the application.
  2. You will soon receive a notification on your UPI app for a pending mandate. Accept it and there you go, your IPO application is done.
  3. You will receive a mail or an SMS mentioning that your application is successfully submitted.
Applying for an IPO online using UPI has low scope of errors. But these applications can also be rejected due to some reasons.

Circumstances that result in rejection of online IPO application.

  1. If you do not have sufficient funds in your bank account.
  2. Information furnished by the applicant is incorrect.
  3. If there is a name mismatch on your Permanent Account Number (PAN) Card with that in your application form or Demat account holder name.
  4. If there are multiple applications submitted by the same PAN number.
To know how to apply for an IPO online with Samco in less than five minutes using UPI – Click here. Samco provides you with a robust investment platform, Samco App through which you can trade and invest in stocks and apply for upcoming IPOs with ease. You can also watch this video and understand how to apply for an IPO using UPI.

Most important points to note about an IPO application

  1. Once you submit your IPO application successfully, the funds get blocked for that particular IPO. So, if you issue a cheque to a third party and do not have a sufficient balance outside the blocked amount, then the check is sure to be dishonoured.
  2. You can apply for only one IPO from a bank account using ASBA. If you apply twice for the same IPO using the same PAN number, all of your applications would be rejected. However, you can apply for an IPO application using your family members account linked with a different bank account.
  3. Under ASBA you can place up to three bids. If you place more than three bids, then the bids may be rejected.

Can you withdraw an ASBA application?

Yes, ASBA application can be withdrawn till the time the issue is open. So, if the issue is open for three working days, you can withdraw it anytime within those three days. Once withdrawn, the blocked amount will be made available to you in one working day.

Eligibility Criteria for ASBA

A retail investor is eligible to apply through ASBA process if these conditions are satisfied.
  1. The applicant should be an Indian resident.
  2. The applicant should have a Demat account with a valid permanent account number (PAN).
  3. The applicant should have a bank account with any SCSB.

Benefits of using ASBA

Here are some of the unique benefits of applying for an IPO using ASBA.
  1. If you apply in an IPO using ASBA, the amount gets blocked in your bank account. Hence, you continue to earn interest as per saving account rates.
  2. ASBA facility is hassle-free. You can easily apply by using net banking without any paperwork.
  3. ASBA eliminates the need to issue cheques and demand drafts.
  4. If you don’t get an allotment, SCSB unblocks and releases the money to your account.
  5. Since the blocked amount is still available in the account, it is considered for the calculation of average quarterly balance (AQB).

Final Thoughts – What is ASBA?

The rise in digitalization has led to a massive shift in the capital markets. Specifically, IPOs. The ASBA process has helped investors apply for an IPO in a hassle-free manner. Recently, Nykaa IPO has made a strong debut on the Indian stock exchanges by listing 78% higher than its issue price. So, you must never let go of such money making opportunities. To get started on your wealth creating journey, open a 3-in-1 account with Samco and apply for upcoming IPOs in less than 2 minutes. Learn more about how to apply for an IPO using ASBA through different banks by clicking on the links below. How to apply for Online IPO through ASBA using HDFC Bank? How to apply for Online IPO through ASBA using ICICI Bank? How to apply for IPO through ASBA using Kotak Bank? How to Apply For Online IPO through ASBA using SBI? Happy Investing

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