Before we talk about applying for an IPO through ASBA, we need to know what do we mean by ASBA.
ASBA or Application Supported by Blocked Amount is a mechanism by which a retail investor can get his or her amount in the savings account blocked until the shares in the IPO are allocated to him. This facility was launched by SEBI back in May 2010. The point is simple – if the shares are allocated to you, the corresponding amount will be deducted from your bank account. At the same time, in case you don’t get any IPO allocation, no amount will be deducted and the amount will be unblocked for your usage.
This also needs to be understood that when an IPO is opened up for bidding, there are different types of investors that can opt to invest:
Retail Individual Investors (RIIs)
Qualified Institutional Investors (QIBs)
Non-institutional Investors (NIIs)
General mass implies retail individual investors and they are one closest one to use ASBA for their IPO bidding.
Furthermore, this bidding happens through Self Certified Syndicate Banks (SCSBs) which satisfy the conditions laid out by SEBI. Investors looking to apply for an IPO have an account in any of these banks. In return, the banks look at:
Accepting IPO applications
Verify the applications
block the bid amount in the investor’s account
once verified, upload all the IPO application details to the bidding system of the exchange.
Are You Eligible for ASBA?
Before you go ahead and apply for an IPO, you need to find whether you are eligible to use ASBA in the first place. Let’s see the different eligibility criteria:
You are an Indian national
Your application is up to ₹2 Lakh for securities and shares (retail investors cannot apply for more than ₹2 Lakh)
You are and will not be bidding under any reserved categories
You will not revise your bidding
How to apply online through ASBA?
Now comes the meat of the discussion where we understand the different steps involved in the overall process of IPO application through ASBA.
Most of the prominent banks such as ICICI, HDFC, Axis etc provide online facility to apply for an IPO online.
You need to login in to your bank account
Find the option of Demat and ASBA Services or IPO application
Fill in the form with the requisite details
Primarily you will need to enter PAN Number, Demat account number and IPO bidding details
Verify through OTP or registered email address
Submit the application details such as PAN Card, DP ID, Client ID, Bid quantity, Bank account number etc.
How to apply offline through ASBA?
Well, in case your bank is still living in the primitive ages and does not offer online ASBA application, you can also go for offline ASBA as:
Find the closest branch of the bank and submit the form along with a copy of your PAN card
Obviously, online application method is way easier as compared to the offline way. Thus, if you are going to regularly apply for IPOs, it’s better to open a bank savings account with online ASBA provision.
Benefits of using ASBA for IPO
Here are some of the positives of using ASBA for your IPO application:
You earn interest on the blocked funds till the time – either you get the shares or your blocked amount gets unblocked.
The amount is debited from your bank account only when the shares get allocated to your account
You can submit up to 5 applications from a bank account using ASBA
You can easily cancel your IPO application before the closure of IPO bids. You can do this by simply sending a cancellation request to the registrars who will coordinate internally with the banks.
The same process can be used in applying for right issues, follow-on public offers (FPOs) etc
No problems of refunds as the amount will be debited from the bank account only if the shares are allocated to you.
You don’t have to trust any third party since your own bank is part of the transaction
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