SEBI designed ASBA IPO application for individual investors as a means to ensure that your money remains available with the investor during the long process of applying for an IPO.
One can invest in financial instruments, i.e. IPOs, FPOs, NFOs through ASBA facility only. The IPO application method is restricted to some assigned banks only. A few banks offer five applications per account while others permit only one application for an ASBA transaction.
Here we will discuss everything that you need to know about the benefits of ASBA, how does it work, the importance of ASBA for investors and other concepts related to the ASBA facility.
ASBA Full Form, meaning in Banking & How it works
ASBA (Applications Supported by Blocked Amount) is the term used for the process of IPO application in India. In simple words, through ASBA, an investor gives the authorization to block the subscription amount in his bank account when he applies for the IPO. An investor cannot use the blocked money for any other purpose. But the blocked money is considered for interest credit.
SEBI – the securities regulator of India has made ASBA mandatory for an IPO application for retail investors since January 2016. SEBI defines ASBA as “An application containing an authorization to block the application money in the Bank account for subscribing to an IPO/FPO or Rights Issue.”
Need for ASBA – Before Jan 2016, retail investors had to apply for IPOs or rights issues through physical application forms accompanied by drafts or cheques. As a result, their money stayed blocked until they offer allotment. There was a situation of over-subscription also that many times caused a high opportunity cost of committing the retail investors’ money. Investors had to wait for a refund for several days. SEBI has eliminated these issues with the ASBA.
The Benefits of IPO bidding through ASBA
- Safe and Trustworthy entity: The Investor is dealing with your known intermediary, i.e. your bank.
- Advantages even on blocked subscription amount: The investor is earning interest on the blocked subscription amount even for the blocked period. And the exciting thing is that the blocked amount is also a consideration for Average Quarterly Balance in banks.
- Revise or withdraw your bid: There is a facility to revise or withdraw your bid on any particular issue. You have to do it in a prescribed format and before the end of the subscription.
- The Facility is free of cost across banks.
- Fast returns from one IPO: Investors don’t need to wait to get their returns like an earlier IPO Application method. They can reallocate the same funds in another IPO without any delay.
- Easy refund cheques/ECS credits: You can shift instantly from one offer to another with your money. Self-certified syndicate bank (SCSB) unblock the subscription money after getting instructions from the registrar in case of no allotment.
- Easy Online Application process: There is no need to submit any document in hard copy. ASBA application method is straightforward in online mode.
Eligibility for ASBA
- Resident of India
- Demat Account Holder
- Valid Permanent Account Number (PAN) Holder
- No overdraft in savings or current account
There are two ways for IPO through ASBA:
1. Physical Application Method
2. Online Method through net banking
The online Method is more convenient and more straightforward than the offline application method. Online application entitles various benefits.
ASBA Physical application process:
- An applicant needs to visit the Self Certified Syndicate Bank (SCSB) branch of the bank where he/she hold an account. The list of banks and their SCSB branches for ASBA is available at SEBI official website. Download and take a print of ASBA application forms. IPO Application form and IPO status are also available at BSE and NSE website.
- Submit the filled application in the bank. The bank will give an acknowledgement and block the amount in your account. Then the bank will send application information to the NSE/BSE. An applicant must maintain the amount equivalent to the IPO application money in his/her account.
- Finally, the applicant can check their IPO application status through BSE and NSE official websites.
How to apply for ASBA IPO online
The ASBA process for IPO online through net-banking is easier.
- Go to the Net-banking portal of your bank.
- Choose the “IPO Application” option in the menu of IPO Online System.
- Fill the required information. Make sure the names in the application and names in the bank account must be the same.
- Mark the total amount at the highest bid so that subscription money can be blocked until the allotment.
- The Subscription amount will be debited only after the finalization of allotment. In the case of non-allotment, the blocked subscription amount will be released after the registrar’s notification.
How to increase chances of getting allotment
- Don’t make a large application: Large applications work in case of large IPOs; otherwise, it will be oversubscribed for retail investors.
- Use different Demat accounts: A investor can’t make more than one application in his name. But he can use different Demat accounts linked to different PAN accounts.
- Avoid last moment rush.
- Avoid technical rejections such as spelling errors, name mismatch from the name in the bank account, mistakes in cheque details. These simple mistakes may result in a lost opportunity on technical grounds.
It is essential for the ASBA retail investor:
- Get in-depth IPO news
- Explore market intelligence section of IPO
- Keep updated about upcoming IPO calendar
- Do your research about the latest forthcoming Indian IPO
- Have a 3 in 1 trading account to fasten the ASBA process
- Avoid last moment rush. IPOs allotted on First-Come, First-Served Basis.
- Follow defined ASBA IPO bidding rules to increase the chances of allotment like Error-free form, proper bidding quantity, etc.
That’s how ASBA will help you to gain traction in an IPO. Follow these practical tips that will ensure confirmed IPO allotment for you. Happy & Successful investing!
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