👶 NPCI

ASBA

• ASBA (Applications Supported by Blocked Amount) is a process used in India for subscribing to Initial Public Offerings (IPOs) and other public issues such as Rights issues.
• It allows investors to apply for shares without having to immediately transfer funds to the issuing company. Instead, the application amount is blocked in the investor’s bank account until the shares are allotted.

Key Features of ASBA

• Blocking of Funds: The amount related to the application is “blocked” in the investor’s account rather than being debited immediately. The funds remain in the account and continue to earn interest (if applicable) until the final allotment of shares.
• No Transfer of Money Until Allotment: The blocked amount is only debited if the shares are allotted to the investor. If no shares are allotted, the blocked funds are released without any deduction.
• Available for IPOs: ASBA is applicable primarily for IPOs and Rights issues in the primary market.
• Convenience: Investors do not need to pay upfront for shares and can continue using the unblocked balance in their account for other purposes until the shares are allotted.

Process

• The investor submits an ASBA application either through their bank (in person or online, depending on the bank’s facilities) or through a broker.
• The bank blocks the application amount in the investor’s account.
• After the IPO process is completed and shares are allotted, the bank debits the exact amount for the allotted shares and releases the remaining blocked funds.

Benefits of ASBA

• Interest Retention: Investors keep earning interest on the blocked amount, unlike traditional methods where funds were debited immediately.
• Faster Refunds: Since the funds remain in the investor’s account, no time is wasted in processing refunds for unsuccessful applications.
• Transparency: Investors have control over their funds, as the money is blocked in their own account, and they can monitor it at all times.
• This system is mandatory for all investors applying in public issues in India, including retail and institutional investors. It was introduced by the Securities and Exchange Board of India (SEBI) to streamline and improve the IPO subscription process.

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- Wikipedia