What is ASBA

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  • 17 Jan 2023

Of late, initial public offering or IPO has gained significant traction in India. Several companies across industry verticals have come up with IPOs to raise capital. One of the main reasons fuelling the growth of IPOs in India is application supported by blocked amount or ASBA. So, what is ASBA, its working mechanism, and benefits? Let’s find out.

ASBA is an investor-friendly facility introduced by SEBI in 2008 to streamline the IPO application process and safeguard investor funds. It allows investors to apply for shares in public offerings without making an immediate payment. Instead, the application amount is temporarily blocked in the investor's bank account until the allotment process is complete.

When utilizing ASBA, the funds are deducted from your account if your application meets the criteria for the desired allocation. If your application is not eligible, the blocked amount is released and refunded to your bank account. Nevertheless, the blocked funds still accrue interest during this period. It is important to note that non-retail investors are required to apply through ASBA.

Now that you know what ASBA is let’s see how you can apply for an IPO through ASBA. You can do it via two methods - online and offline.

  • Online Process:

While the specifics may differ across platforms, on most occasions, you need to:

  • Enter into your net banking account and click on ‘IPO Application’
  • Select the IPO you want to bid for
  • Fill up the application form with the required details in the redirected IPO platform
  • Fill up essential information such as PAN number, bid price and quantity, along with the 16-digit DP number
  • Place and confirm your order

To facilitate participation in your favorite IPO, Kotak Securities makes applying through ASBA through its intuitive app easy and hassle-free. In this video you can learn how to apply for an IPO through ASBA on the Kotak Securities App.

  • Offline:

In the offline method, you need to:

  1. Download the ASBA form from the NSE and BSE websites and fill up details like name, PAN card, Demat account number, bid quantity, bank account number, and IFSC code
  2. Submit the duly-signed form at the self-certified bank and collect the acknowledgment receipt

The bank will block the amount and upload the details on the bidding platform.

  • Enhanced Liquidity : ASBA prevents investors from tying up their funds during IPO applications.

  • Secure and Convenient: ASBA offers a safe and convenient way to apply for public offerings. Investors do not need to issue physical checks or transfer funds separately to the issuer's bank account. It eliminates the risk of funds being misused or lost in transit.

  • Easy Application Modification: ASBA allows investors to modify or withdraw their application bids during the IPO bidding period. This flexibility enables investors to change based on market conditions or revised investment preferences.

  • No Refund Hassles: In case of non-allotment or partial allotment, the blocked amount is automatically unblocked, and the remaining funds become accessible to the investor without any refund hassle.

  • Cost-Effective: ASBA eliminates the need for investors to pay additional charges for issuing checks or transferring funds. This reduces transaction costs and makes the IPO application process more economical.

In Conclusion

Application Supported by Blocked Amount has emerged as a revolutionary method for investors to apply for public offerings in a secure, cost-effective, and convenient manner. By utilizing ASBA, investors can streamline the application process, enjoy enhanced liquidity, and modify their bids per their requirements. Moreover, ASBA eliminates the hassles associated with refunds, making it a preferred option for investors participating in IPOs.

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