Application Supported by Blocked Amount (ASBA) is an application made by an investor, containing 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 Initial Public Offer (IPO) and Follow-on Public Offer (FPO).
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only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn / failed.
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.
Advantages of applying through ASBA
Applying through the ASBA system offers the following advantages:
1. An investor need not pay the application money by cheque. Rather the investor submits the ASBA, which includes an authorisation to block the bank account, to the extent of the application money
2. The investor does not have to worry about refunds. This is because only the required amount for allotment of securities is taken from the bank account. And this happens only when the application is selected for allotment.
3. The investor continues to earn interest on the application money as the same remains in the bank account
4. The application form is simpler
5. The investor deals with a known intermediary i.e. his or her own bank
