ASBA Full Form & Meaning: Detailed Overview

Subscribing to shares in an Initial Public Offering (IPO) today is far simpler than it used to be. Earlier, investors had to wait long for allotment updates and face refund delays if shares weren’t allotted.

To address these challenges, SEBI introduced the Application Supported by Blocked Amount (ASBA) facility. Under ASBA, the IPO application amount remains blocked in the investor’s bank account and is debited only if shares are allotted.

In this article, we’ll explore what ASBA is, how it works, its application process, eligibility, and key features.

Table of contents

• What is ASBA?
• How does ASBA work?
• How to apply for ASBA
• Eligibility criteria for ASBA
• Benefits of ASBA

What is ASBA?

Before ASBA, investors applying for IPOs had to issue cheques and wait weeks or even months for allotment updates. During this time, their money remained with the issuer without earning any interest, and refunds took additional time if shares weren’t allotted.

ASBA changed this process by allowing investors’ funds to remain in their own bank accounts. The required amount is simply blocked until allotment. Once shares are allotted, the corresponding amount is debited, and the remaining balance is automatically released.

This system eliminates refund delays, enhances transparency, and simplifies the IPO application process. It is now mandatory for all investors applying for IPOs.

Read Also: How to Invest in an IPO: Step-by-Step Guide

How does ASBA work?

The ASBA mechanism is simple. After the investor submits the application for the IPO, the respective bank blocks the amount in the investor’s bank account equivalent to the number of shares applied for multiplied by the IPO price but does not transfer funds until allotment is confirmed by the exchange.

The bank uploads the investor’s application details to the stock exchange. The exchange then verifies and processes all applications received under ASBA. Once the IPO allotment is finalised, the amount corresponding to the allotted shares is debited from the investor’s account. If no shares are allotted, the blocked amount is released automatically.

How to apply for ASBA

• Under the ASBA (Application Supported by Blocked Amount) facility, investors can apply for any public or rights issue using their bank account.
• The investor must fill out the ASBA form, available at designated branches of banks acting as Self-Certified Syndicate Banks (SCSBs).
• The form requires key details such as:

1. Name of the applicant
2. PAN number
3. Demat account number
4. Bid quantity and bid price
5. Other relevant information

• The filled form is submitted to the bank branch along with an instruction to block the required amount in the investor’s account.
• The bank uploads the application details onto the bidding platform.
• Investors must ensure that all the details provided in the ASBA form are accurate, as any errors may lead to rejection of the application.
• Investors can also apply for IPOs online or electronically, if such a facility is offered by their SCSB.

Read Also: What is the Process of Selling IPO Shares

Eligibility criteria for ASBA

Bank account with an SCSB

An investor must have an account with a Self-Certified Syndicate Bank that offers ASBA services. The list of SCSBs is available on SEBI’s official website.

Demat account

It is mandatory to have a valid demat account as the shares allotted in an IPO are credited electronically. Without a demat account, you cannot apply through ASBA.

Permanent account number (PAN)

An investor must also have a valid PAN for IPO applications to ensure transparency and compliance with SEBI regulations.

Sufficient balance

Without sufficient balance in the bank account, the investor may not be able to cover the full application amount. The bank blocks this amount at the time of application.

Individual and non-individual investors

Both retail investors and non-retail investors such as corporates, trusts and financial institutions can apply through ASBA, provided they meet the required conditions.

Read Also: Lock-In Period for IPO: Meaning, Types and How it Works?

Benefits of ASBA

• Funds remain in the investor’s account: A key feature of ASBA is that the investor’s money doesn’t get deducted from their bank account until the shares are allotted. The bank only blocks the amount. This may reduce the risk of mismanagement or delays in refunds.
• Elimination of refund delays: Earlier, investors used to pay through cheques while applying for the IPO. The refunds would take several days if shares were not allotted. Through ASBA this delay in the refund has been eliminated.
• Continued interest earnings: The amount remains in the bank account until allotment and may continue to earn interest depending on the type of bank account and its applicable terms.
• Convenience and transparency: ASBA offers both online and offline modes of application, giving investors flexibility. The system is designed to be transparent, as investors typically receive updates from both their banks and the stock exchanges about the status of their application.
• Regulatory oversight: ASBA is governed and monitored by SEBI to ensure that the process adheres to all necessary guidelines. This regulatory oversight contributes to the system's reliability and adherence to guidelines for investors.
• Reduced paperwork: Online ASBA applications require minimal documentation, making the process more streamlined.

Conclusion

The Application Supported by Blocked Amount (ASBA) has transformed the IPO application process in India. By keeping investors’ funds in their own accounts until allotment, ASBA not only ensures transparency and efficiency but also provides greater control and convenience for investors.

Today, applying for an IPO is simpler, faster, and more investor-friendly, making it a significant step forward in modernising India’s capital markets.

FAQs

Do I have a higher chance of getting an IPO if I apply through ASBA?

No, using ASBA does not increase your chances of IPO allotment. The allotment process depends on the number of applications received and is conducted through a computerised draw system.

Can my ASBA application form get rejected?

Yes, an ASBA application can be rejected if there are errors in the details. You can approach the concerned SCSB for any complaints regarding your ASBA applications. SCSB is required to give a reply within 15 days.

If I apply through ASBA, will my entire bank account be blocked, or only the amount worth the IPO be blocked?

Only the amount corresponding to your IPO application, which is the number of shares multiplied by the bid price, is blocked.

Can I make applications through ASBA for all the issues?

ASBA can be used to apply for public issues such as IPOs, rights issues, and follow-on public offers (FPOs) that are supported by the ASBA facility.

What is a Self-Certified Syndicate Bank in the ASBA process?

An SCSB is a bank authorised to offer ASBA services to its customers. The list of such banks is available on SEBI’s official website.

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