Application Supported by Blocked Amount (ASBA)

ASBA or Application Supported by Blocked Amount is an IPO process by the market regulator, Securities and Exchange Board of India (SEBI). It can block the application money in bank for subscribing to an initial public offering (IPO).

The money gets debited only if the application is selected for allotment and is refunded if the IPO is not won.

SEBI has declared that it was mandatory to fill an ASBA form if one wants to invest in IPO. Through ASBA, one can earn interest on the blocked amount.

It contains an authorization to Self-Certified Syndicate Bank (SCSB) to block funds available in applicant’s Savings Bank Account or Current Account (other than Overdraft or loan accounts), for subscribing to an Issue, to the extent of application money, till finalisation of allotment in the issue or till withdrawal/ failure of issue, or till withdrawal/ rejection of application, as the case may be.

It is a supplementary process available for all public issues made through book building route and also to all Debts & Right Issues. ASBA facility can be used for IPO and Follow on Public Offer (FPO).

Under ASBA, funds blocked in the account, will continue to earn interest during the application processing period, if held in an interest-bearing account. Bank will mark a lien on the deposit account of the investor to the extent of the application money. The lien will be removed immediately after finalization of the basis of allotment. If bid is successful, the deposit account will be debited and the allotted shares will be transferred by the Company to the applicant’s Demat account.

Some of the eligibility criteria for ASBA are:

• One must be an Indian residential investor.

• One must have a valid PAN number along with a demat account and trading account.

• One must apply through the blocking of funds in the bank account with self-certified Syndicate Banks.

• There should be an adequate balance in your bank account.

• One must bid at cut off, with a single option of number of shares to bid for.

• One must not bid under any of the reserved categories.

• One must agree to the terms and conditions of not revising a bid.