ASBA in IPOs – Meaning, Process & benefits of ASBA

The term ASBA has been used a lot recently in the string of IPOs that are launched in 2022. Application to IPO through ASBA and eligibility for ASBA are some of the vital points that investors had to go through to apply for their target IPO. But what is the meaning of this term and why is it so relevant in an IPO? Given here are the answers to these questions and other key details related to ASBA. 

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What is the meaning of ASBA?

ASBA stands for “Application Supported by Blocked Amount.” This facility is provided by banks to investors for applying to public issues (such as initial public offerings or IPOs). Under this system, the application money for the IPO is blocked in the investor’s account and is not debited until the allotment of shares. This process ensures that the funds are available to the issuer (the company issuing the shares) only at the time of allotment of shares. This process is used to avoid refund of application money in case the shares not allotted to the applier. 

What are the eligibility criteria for ASBA?

The eligibility for ASBA is as per the guidelines of SEBI. The eligibility for individuals to qualify for ASBA are

• Being a resident Indian
• The investor needs to have a valid PAN Card and a Demat account with a depository participant (DP) who is a member of the ASBA process.
• The investor needs to have a valid and active bank account with a bank that is a member of the ASBA process i.e, a Self-Certified Syndicate Bank (SCSB)
• The investor should also have a sufficient balance in their bank account to match the bid value.
• Meeting any other criteria specified by the issuer of the IPO or SEBI.

How to apply for an IPO through ASBA?

Investors have the option to apply for an IPO through ASBA using the online or offline process.  The details of the same are given here. 

1. Online process for ASBA

The online process has greatly simplified the IPO application process for retail investors. The steps involved in this process are mentioned hereunder.

• The first step is to log in to the net banking account using valid credentials and click on the ‘IPO Application’ tab. 
• Following this investors will have to select the specific IPO they wish to invest in. Investors can choose up to 3 bids at this stage. 
• The application form needs to be filled in correctly with the necessary details when the investor is redirected to the IPO platform. 
• The details include PAN number, bid price, bid quantity, and 16-digit DP number.
• The final step is to place and confirm the IPO application order.
  

2. Offline process for ASBA

The offline process is the traditional mode for applying for an IPO through ASBA and is given here. 

• The first step is to download the IPO application form available from NSE and BSE websites. 
• Investors have to fill out the mandatory details like the name, PAN Card details, bid price, bid quantity, Demat account number, bank account number, and IFSC code. 
• This duly filled application form has to be submitted to the Self-certified Syndicate Bank (SCSB)
• Investors need to collect the acknowledgment or the receipt from the bank upon submission of the application. 
• This will allows the bank to then block the bid amount and upload the details of the same on the bidding platform.

3. Applying for IPO through UPI

Small investors investing up to Rs. 2,00,00 can also apply for an IPO through UPI now. The process for the same is given here. 

• The first step is to log in to the client’s portal on the broker’s website. 
• Investors then have to click on the IPO application button. 
• The investors will be given the options of the IPO they can bid for and they have to proceed by selecting their target IPO. 
• The next step is to select the preferred bid size and the cut-off price available in the bidding window. 
• Investors then need to provide valid UPI details and accept the payment request sent to the UPI app to complete the payment after entering the UPI PIN. 
• Investors will receive an email and SMS confirming the successful submission of their application along with the receipt number.

What are the benefits of using ASBA?

There are multiple benefits to using ASBA and the process has become quite popular over the years. A few benefits of using ASBA for applying in an IPO or FPO are given here.

• The investor has total control of the funds until the allotment process is complete.
• Investors can cancel their application at any time before the completion of the allotment process. Such action will immediately trigger the process of releasing funds back to the bank account of the investor. 
• The use of ASBA has eliminated cases or situations of refund delays.
• ASBA also benefits the company as it reduces its administrative burden of issuing the IPO as well as that of the registrar in coordinating and issuing refunds.
• ASBA may also be eligible for applying for other government schemes and subsidies.

Conclusion

ASBA is a simple process that has streamlined the process of investing in IPOs. This process is instrumental in securing the investor’s funds and ensuring that they get hassle-free refunds in case of non-allotment. Based on the multiple benefits of using ASBA, the regulator SEBI made it mandatory for all IPOs in 2016. 

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