ASBA -Application Support By Blocked Amount: In the past few years, the regulator SEBI has been taking many measures to make investing more transparent. The introduction of ASBA in Sept. 2008 was one such step. This has made the process of applying for IPO by Investors more hassle-free and convenient.
What is ASBA?
Who can use ASBA facility?
Who is authorized to open ASBA a/cs?
What are the Benefits of ASBA to Investors?
What are the Benefits of ASBA to Banker?
What is the process in ASBA?
What are the conditions?
What is ASBA?
ASBA is basically a Bank account – SB or CD, with an authorisation from the A/c holder to the Bank to block the application money in the bank account, for subscribing to an issue.
If an investor is applying through ASBA, his application money will be debited to his Bank account only when his application is selected for allotment.
Under ASBA, the Investor can commit a certain amount for subscribing to an issue which gets blocked in his account.
The Investor’s money remains with the Bank till the shares are allotted after the IPO.
Money is transferred out of the Investor’s account to the Company after allotment.
For example, if an Investor makes an application for an IPO for Rs.1.00 lakh, through ASBA, the amount is blocked in his account. o This amount is taken out only on allotment of shares.
If he is allotted only Rs 60,000 worth of shares, Rs 40000 is unlocked and available in the account.
Who can use ASBA facility?
Currently as per SEBI guidelines, all three categories of investors, i.e.,
1. Retail Investors,
2. Qualified Institutional Buyers,
3. Non-Institutional Investors,
shall mandatorily make use of ASBA facility for making application in Public/Rights Issue
Who is authorized to open ASBA a/cs?
Banks are registered with SEBI as Bankers to an Issue under the SEBI (Banker to an Issue) Regulations, 1994
All such Banks are eligible to act as Self Certified Syndicate Bank – SCSB for the purpose of ASBA
As per data available on the SEBI site, 50 Banks are currently listed as SCSBs for ASBA
The self certification is for certifying that:
they have undertaken the mock trail run of their systems with the Stock Exchanges and Registrars
they have satisfied themselves that they have adequate infrastructure in place at their Controlling Branch/ Designated Branches to fulfill their responsibilities/ obligations as envisaged in the ASBA process within the timelines specified therein.
What are the benefits to Investor?
The amount held in the account of the customer would continue to earn interest as applicable to the account, till actual allotment.
Any balance in the account over and above the blocked amount is free from any charge.
The applicants can cancel, revise or modify the bid within the bidding period.
Facility to apply through Internet without the necessity of visiting the branch is available.
The other advantage of this mechanism is that the refund of money on unallotted shares happens very quickly.
Prior to the introduction of this facility, investors had to wait for the shares to be allotted before the unutilised amount was returned.
Also, the residual amount was returned through cheques and refunds used to take up to 45 days to reach the investors.
Further ASBA has resulted in greater efficiency of the markets, by reducing the listing time to 12 days from the existing 22 days.
This reduction in time has helped reduce the ambiguity in the market, and also helped the Retail Investors in cutting cost on blocking the amounts for a longer period.
What are the benefits to the Bank?
Bank has the benefit of holding under lien the application money for the interim period till the shares are allotted, upon which money is transferred to the Company.
Thus the Bank enjoys float funds.
Conditions in ASBA
Investors need to first get ASBA form either from the websites of stock exchanges or those of book running lead managers.
Banks also provide the facility wherein one can use internet banking facility to apply for an IPO.
Others can apply through physical application by approaching any branch of a self-certified syndicate bank (SCSB) where one has either saving or current account.
One does not need to have a depository participant (DP) account with their SCSB for the same.
An investor is permitted to make a maximum of three bids within the price band.
The quantity can be in multiples of the lot size specified by the issuer.
The amount equivalent to the highest bid is picked and blocked.
Following that, the SCSB uploads the details of the application on the bidding platform.
One has to be vigilant while filling the application, as any incorrect data may lead to rejection.
One can revise the bids upward or downward and even withdraw or cancel it when the issue is opened.
What is the Process in ASBA?
Customer logins to the net banking website
Under ASBA menu, Chooses the IPO to apply in and fills bidding details like category, quantity and amount
Allocates the funds and Submits IPO application
Bank blocks the funds (Marks the lien)
Bank sends the application to the Stock Exchange
Exchange accepts the bid and sends the application number to the bank
Bank informs the customer about the successful bid
After the closing day, the exchange shares bidder details with the registrar
Registrar completes IPO allotment process and sends request to the Banker for transfer of funds
Registrar transfers the shares in demat account of the Customer after funds are transferred to Company
The Prerequisite Criteria for Applying ASBA
The Prerequisite Criteria for applying ASBA is that the customer should have
I. OPERATIVE S/B OR CD BANK ACCOUNT with our bank
II. DEMAT ACCOUNT from NSDL / CDSL
Customer can apply ASBA by Four ways:
I. Direct ASBA ( Apply by Our Branches, forms can be downloaded from NSE Website) (Off-lineMode)
II. Syndicate ASBA (Customer will apply through the Brokers & submit to us for blocking of funds in their respective account in our Bank) (Off-line Mode)
III. By Internet Banking (Online Mode)
IV. Trading App with any broker + UPI as mode of payment (Online Mode)
Prerequisite for Appling ASBA by Branch
Note : All Branches are enabled for Normal ASBA as well as Syndicate ASBA
I. Any IPO which is live will be activated by Nodal Branch (4082) and all parameters are also set at Nodal Branch level only. One IPO is activated it becomes available for branches to post application / entries in ASBA and online too
II. For creation of USERID (USER ID) will be the PF NO without 0 (zero) and resetting of passwords branches should contact Nodal branch (Capital Market services Branch) on 022-49628971 or mail details on email@example.com III. Maker & Checker concept is applicable in ASBA accordingly to the CBS capability level (Maker should have lower Capability & Checker should have higher Capability level) IV. SYNDICATE ASBA is that where the Customer has Bid their forms through the Brokers and they will submit to us for the blocking of funds in their respective account, Bid entry number will be there in the form
V. SYNDICATE ASBA starts from the second day of opening of IPO and remains live till the T + 1 modification i.e. one day after the closing of the IPO VI. Branches should invariably despatch All Syndicate ASBA forms in original with the forwarding to Capital Market Services Branch on completion of the Syndicate ASBA in one lot VII. Branches are advised to accept the application forms till the T + 1 modification date and punch the data on day to day basis VIII. Branches should note that since it is time bound schedule , it has to be finished on time . For ASBA the cut off time is 3.00 pm on last day and for Syndicate ASBA cut off time is also 3 pm on the last day i.e. T + 2.