Introduction to Applications Supported by Blocked Amount (ASBA)
ASBA is a process developed by SEBI to apply for IPOs, Rights and Debts Issue, FPS and more. It entails that the amount to be paid for subscribing the shares does not get debited from the investor’s account until the shares have been allotted by the company.
Understanding Applications Supported by Blocked Amount (ASBA)
Investors can apply for ASBA and have the bank block out the application money until the shares get allotted to the investor. ASBA will provide the authorization of the investor to subscribe only when the application is selected for the issue. This blocking is carried out by Self-Certified Syndicate Banks (SCSB). Upon the approval of the issue to the investor, the funds are paid accordingly. Self Certified Syndicate Banks (SCSBs) are SEBI authorized banks that confirm to the conditions laid by SEBI to accept the applications, verify and block the amount to the extent of what the application requires, upload the details to the web and stay updated with the process until the shares are allotted. If the issue gets withdrawn, or the investor has not been allotted the shares, then SCSBs refund the money back to the investor’s account. The reason for this process to come into effect was to eliminate the inconvenience of finding refunds or have shares not be allotted. As such, the investor does not need to hurry around to pay via cheques and demand drafts, because ASBA demands that the investor has adequate funds (along with a Demat account, PAN number and a trading account).
Highlights of Applications Supported by Blocked Amount (ASBA)
Subscribing to issues via ASBA is a mandatory option since as of 2016. If the money has been blocked in an interest bearing ASBA account then the amount will continue to earn interest during the time it takes to get the allotment of the share. The investor needs to be an Indian resident to avail ASBA.
