ASBA means “Application Supported by Blocked Amount”. It is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. Under ASBA facility, investors can apply in any public/ rights issues by using their bank account. Investor submits the ASBA form (available at the designated branches of the banks acting as Self-Certified Syndicate Banks, SCSB) after filling the details like name of the applicant, PAN number, demat account number, bid quantity, bid price and other relevant details, to their banking branch by giving an instruction to block the amount in their account. In turn, the bank will upload the details of the application in the bidding platform. Investors shall ensure that the details that are filled in the ASBA form are correct otherwise the form is liable to be rejected. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn/failed.
The ASBA facility was introduced by SEBI for retail investors in 2008. From January 1, 2010, onwards it has been extended to corporate investors and High net worth individual (HNIs) as well. The applicant can submit the ASBA application to the SCSB with whom he/she is maintaining the account to be blocked (to the extent of the application money) for the purpose. The application can be submitted either by filling up the form or online, by using the Internet banking facility.
Advantage of ASBA
The investor need not pay the application money by cheque rather block his / her bank account to the extent of the application money, thus continue to earn interest on application money.
- The investor does not have to bother about refunds, as in ASBA only an amount proportionate to the securities allotted is taken from the bank account when his / her application is selected for allotment after the basis of allotment is finalised.
- The application form is simpler.
- The investor deals with the known intermediary i.e. his or her own bank.
- No loss of interest, since the application amount is not debited to the savings account on application.
- Since the amount is available in the account, it is considered for calculation of the Average Quarterly Balance (AQB).
- Customer can revise / withdraw the bid before the end of the Issue in the prescribed format with the Bank.