Applications Supported by Blocked Amount (ASBA)

While subscribing a public issue, a prospective shareholder is expected to send along with his share application , a cheque being the subscription amount, based on which the funds in the account of the prospective shareholders are withdrawn by the company.

What  is ASBA: ASBA is an application containing an authorization by the investor to block the application money in his bank account, for subscribing to a public issue. Under ASBA, application money shall be debited to the bank account only if application is selected for allotment after the basis of allotment is finalized. In case of rights issue, the money shall be debited to the account after the receipt of instruction from the registrars.

Who can apply through ASBA process?: An individual investor can apply through ASBA process in a public issue through book building route provided he/she:

1. is a resistant retail individual investor i.e applying for shares/securities up to Rs1, 00,000/-

2. is bidding at cut-off, with single option as to the number of shares bid for;

3. is applying through blocking of funds in a bank account with the SCSB;

4. has agreed not to revise his/her bid;

5. is not bidding under any of the reserved categories.

Self certified syndicate bank  (SCSB)

SCSB is a bank which is recognised as a bank capable of providing ASBA services to investors. The list of such banks is available in website of BSE, NSE and SEBI. It is also given in the ASBA application form.

Record keeping: ASBA physical forms may be retained for a period of 6 months with SCSB for redressing complaints if any, of ASBA investor and thereafter the same may be sent to the issuer. As regards electronic ASBA, SCSB need not take print out or submit such print out to issuer or registrar.

Advantage in applying  through ASBA:

(i) the investor is not required to pay the application money by cheque in advance. Instead, the investor submits ASBA which accompanies an authorization to block his bank account to the extent of the application money.

(ii) in ASBA only that much money which is required for allotment of securities, is taken from the bank account only when his application is selected for allotment after the basis of allotment is finalized.

(iii) the investor continues to earn interest on the application money as the same remains in the account.

(iv) the entire bank account will not be blocked. Only the amount to the extent of application money authorized in the ASBA will be blocked in the bank account. The balance money, if any, in the account can still be used for other purposes.