ASBA (applications supported by blocked amounts) was introduced by SEBI to protect the interests of the retail investors. ASBA can used to apply for IPOs, FPOs, rights issues etc. In ASBA, the designated bank account only gets blocked to the extent of the application money. On the date of allotment, the amount gets debited to the extent of allotted shares and the balance gets released. If zero shares are allotted to the applicant, then the entire blocked amount under ASBA is released.
Who can make an ASBA investment?
ASBA is mandatory for all IPOs after January 01st 2016. However, an ASBA investor has to fulfil some basic conditions.
He must be a resident individual applying under the Retail Quota
Bid must be at cut-off price with a single option of number of shares bid
ASBA application has to be made through self certified syndicate bankers (SCSB)
Such price intibid made in ASBA cannot be revised later on
ASBA cannot be used for other categories like employees / shareholders etc.
What are the advantages of ASBA?
ASBA comes as a major boon to retail investors. Here are some of the major advantages.
Since the amount is only blocked, you continue to earn interest
You don’t worry about refunds as only the allotment money is debited
The application process is very simple and you can apply through your bank
The blocked amount is included in average quarterly balance (AQB)
Even through bids cannot be revised, they can be cancelled.
How can an ASBA application be cancelled?
While an ASBA application cannot be revised as per the rules, the ASBA application can certainly be cancelled. There are two distinct situations here. If the IPO has not closed, you can cancel the ASBA application through your online trading account or through the bank. Your SCSB will cancel the bid and unblock the amount right away. However, if you withdraw after the issue closes, then you have to write to the registrar to cancel the bid. The SCSB will only remove the block after the allotment is complete and they get intimation from the registrar.