ASBA: Application Supported by Blocked Amount
- 29 March 2017 | 1143 Views | By Mint2Save
ASBA stands for Application Supported by Blocked Amount.
ASBA is an application comprising an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, the application money shall be debited from the account only if the application is nominated for allotment after the basis of allotment is decided, or the issue is withdrawn/failed. This system, which safeguards that the applicant’s money remains in his/her bank account till the shares are allotted, was introduced by SEBI for retail investors in 2008. Now it has been stretched to corporate investors and HNIs (High net worth individual) also from January 1, 2010, onwards.
Process of applying in IPO through ASBA:
Under ASBA system, investors can apply in any public/ rights issues by using their bank account. The investor submits the ASBA after filling the details like PAN number, name, Demat account number, bid quantity, bid price and other related details, to their banking branch and then the bank shall upload the details in the bidding platform. Investors should confirm that the details that are filled in the ASBA form are precise otherwise the form is accountable to be rejected.
Who all can apply through ASBA?
SEBI has been postulating the investors who can apply through ASBA.
- In public issues all the investors can apply through ASBA starting from May 1, 2010.
- In rights issues, all shareholders of the company as on the record date are allowed to use ASBA for making applications on condition that he/she/it.
- Is holding shares in dematerialized form and has applied for the rights or additional shares in the issue in the same form.
- Has not rejected its rights in full or in part.
- Is not a renounce
- Who is applying via blocking of funds in a bank account with the SCSB
Advantages of applying through ASBA:
- Before the introduction of ASBA, if you apply in an IPO, the entire amount had to be paid even before an allotment by retail investors. When there was no allotment or part-allotment, the amount would get reimbursed to the applicant after 20-30 days. This was a lost opportunity as the funds did not earn any interest during the period. If the application is made through ASBA, the funds remain blocked in your account, but continue to gross the interest. It is specifically significant after the shift to interest calculated on the daily balance.
- The investor does not have to trouble about refunds, because in ASBA, only money to the extent required for allotment of securities, is occupied from the bank account only when his application is nominated for allotment after the basis of allotment is confirmed.
- The investor deals with its own bank.
It is compulsory for all public issues opening on or after January 01, 2016.
SOME IMPORTANT FEATURES OF ASBA:
- An investor can submit the application form to his trading member or to a SCSB. List of Self Certified Syndicate Banks (SCSBs) and their designed branches, that is, branches where ASBA application form can be submitted, is available on the websites SEBI (www.sebi.gov.in) and on the website of NSE (URL:http://www.nseindia.com/content/ipo/scsb_list.zip).The list of SCSB is also given in the ASBA application form.
- SCSB is a bank which is familiar as a bank proficient in providing ASBA services to its customers. Also, in case of for any complaints regarding your ASBA applications, you have to approach the concerned SCSB.
- Five (5) applications can be made from a bank account per issue.
- ASBA option is available both online and offline. All you need to do is fill up the physical form and submit the same to the SCSB/Trading-member or you can apply electronically/online through the internet banking facility/online facility (if provided by your SCSB/Trading member).
- An investor may apply either through ASBA OR through the existing system of payment through cheque. But, If an applicant applies through both ASBA as well as through the existing system, then both the applications having the same PAN, will be treated as multiple application and hence can be rejected.