What is ASBA?  Advantages and the Application Process

The application of Amalgamated Share Brokers’ Assistance (ASBA) can prove highly advantageous for individuals seeking to venture into the realm of Initial Public Offerings (IPOs), yet grappling with the daunting and time-consuming nature of the process. ASBA has ushered in a wholly digitalized approach, enabling prospective investors to seamlessly complete their IPO applications via their mobile devices. Additionally, it guarantees the security of your funds, offering a refund safety net in cases where the allocation eludes you.

As the name implies, an Initial Public Offering signifies the maiden offering of a company’s shares to the general public. These shares find their initial haven in the primary market, as investors eagerly acquire stakes in the company’s maiden voyage into the public domain. To secure an allocation, investors must diligently navigate the intricacies of the application process.

Completing an IPO application can prove to be a challenging and time-intensive endeavor. Despite the evolving convenience in recent times, a few drawbacks persist. Previously, prospective investors had to physically acquire the application forms from the broker’s office, followed by arduous hours spent manually populating them. Furthermore, the submission of requisite documents and a signed check had to be orchestrated well in advance, with no recourse for rectifying inadvertent errors. Initially, the IPO application privilege was confined to financial institutions, excluding ordinary investors from participation.

However, the landscape has undergone a radical transformation with the advent of digitalization. The need to physically procure application forms and endure the laborious task of manual completion has been relegated to the past. Until recently, investors grappled with concerns over the security of their funds in cases of unfulfilled allotments. ASBA, introduced by the Securities Exchange Board of India (SEBI) in 2008, has emerged as a panacea for these issues and more. It has streamlined and contemporized the IPO filing process, significantly enhancing accessibility for investors seeking to partake in the IPO journey.

What is ASBA? 

The process of applying for Initial Public Offerings (IPOs) has undergone a remarkable transformation, thanks to the advent of ASBA, an acronym denoting “Application Supported by Blocked Amount.”

SEBI (Securities and Exchange Board of India) took its first stride in simplifying the IPO application process back in 1993 with the introduction of StockInvest. This initiative aimed to address the various challenges that investors encountered during IPO applications. Its primary goal was to safeguard investors’ funds in cases where they were not allocated shares in the IPO, ensuring easy and prompt refunds. However, StockInvest failed to garner favor among investors and proved ineffective in achieving its objectives. Consequently, a decade later, in 2003, SEBI made the decision to discontinue StockInvest. At that time, many individuals were not well-versed in technology, and there were pervasive concerns regarding its authenticity. Furthermore, the prevailing landscape of online fraud raised significant doubts about digital security.

With the cessation of the StockInvest scheme, SEBI faced a daunting challenge in fulfilling the original goals set by StockInvest. In response, in 2008, they introduced the Application Supported by Blocked Amount (ASBA) system. This innovative scheme eradicated any potential for fraudulent activities by establishing a direct link between the applicant’s bank account and the funds required for IPO subscription. It also imposed rigorous Know Your Customer (KYC) regulations to enhance security measures.

In essence, ASBA, short for “Application Supported by Blocked Amount,” involves an investor’s request to a Self-Certified Syndicate Bank (SCSB) to block funds in the applicant’s bank account, equivalent to the application amount for subscribing to an IPO. These funds remain blocked until the IPO issue is fully allocated, withdrawn, or unsuccessful, or until the applicant chooses to withdraw or cancel the application.

ASBA’s requirements for purchasing bids

criteria must be met when applying for an IPO through the ASBA method:

1. Eligibility: Only Indian citizens are eligible to apply for an IPO through ASBA.
2. PAN Card Requirement: It is imperative to possess a valid PAN (Permanent Account Number) card number to proceed with the ASBA application.
3. Digital Demat Account: An essential prerequisite is the possession of a digital Demat (Dematerialized) account with an accredited brokerage firm. This account facilitates the electronic holding of securities.
4. Adequate Balance: Your bank account should maintain a sufficient balance to cover the funds that will be blocked during the application process.
5. SCSB Account: You must have an account with a Self-Certified Syndicate Bank (SCSB), a financial institution authorized to provide ASBA services. You can verify your bank’s eligibility as an SCSB on the SEBI website.

You should have the following in mind:

1. Irrevocable Bids: Once you have set your bid using ASBA, it cannot be modified or amended.
2. Reserved Category Restrictions: ASBA bidding is not permissible in the reserved category of IPOs, which are typically earmarked for specific investor groups.
3. Maximum Bid Amount: For retail investors, the bid amount cannot exceed ₹2 lakhs.
4. Limited Bids: Each applicant is allowed a maximum of three bids for an IPO.

These guidelines are essential to ensure a smooth and compliant application process through ASBA.

Advantages of opting for ASBA when applying for an IPO:

1. Earning Interest on Blocked Funds: Your funds may remain locked for an extended period during the IPO application process. When utilizing ASBA, you continue to accrue interest on these locked funds, even if you do not secure an allotment. This means that your money works for you, even during the application phase.
2. Hassle-Free Application: ASBA offers a hassle-free and efficient method for IPO applications. You can simply log into your bank account, select the desired IPO, specify the quantity of shares you wish to purchase, set the price, and make your investment. This streamlined process eliminates the need for time-consuming form completion or visits to a broker’s office.
3. Prompt and Effortless Refunds: While certain factors can increase your chances of receiving an allotment, there are no guarantees. ASBA provides peace of mind by ensuring that your funds will be swiftly refunded to your bank account if you do not secure an allotment.
4. No Additional Charges: ASBA services come with no additional charges or hidden fees. Every Self Certified Syndicate Bank offers ASBA application options entirely free of cost, making it a cost-effective choice for investors.
5. Enhanced Fund Security: ASBA safeguards your funds by preventing the issuing company of the IPO from accessing your capital until the shares are officially allotted and appear in your Demat (Dematerialized) account. The blocked amount is also taken into account when computing your Average Quarterly Balance.
6. Paperless Process: The application process is entirely paperless, eliminating the need to submit physical documents or checks in advance. ASBA allows you to apply for IPOs through digital channels, such as net banking, ensuring a seamless and environmentally friendly experience.

Online ASBA Application Process:

1. Login: The customer accesses their bank’s net-banking website or mobile app.
2. Online IPO Section: Within the online banking platform, the customer navigates to the dedicated Online IPO section.
3. Registration: Start by registering with ASBA as a new investor. Investor Name: Provide your full name as the investor. Depository Name: Specify the name of your depository, where your Demat account is held. Demat Account Number: Enter your unique Demat account number. PAN Number: Provide your PAN (Permanent Account Number) for identification purposes. By completing these steps, you initiate your registration as a new IPO investor through ASBA, facilitating your participation in upcoming IPOs.
4. Select IPO: The customer selects the specific IPO they wish to apply for.
5. Bidding Details: Details pertaining to the bid are filled out, including the category of shares, the quantity desired, and the specified amount for the bid.
6. Allocate Funds: The customer allocates the necessary funds for the IPO application.
7. Submit Application: The completed IPO application is submitted through the bank’s platform.
8. Funds Blocked: The bank places a hold on the allocated funds, marking them as liens to ensure they are reserved for the IPO.
9. Application Sent to Exchange: The bank transmits the IPO application to the relevant stock exchange.
10. Exchange Confirmation: The stock exchange acknowledges and accepts the bid, providing an application number to the bank.
11. Customer Notification: The bank promptly notifies the customer regarding the successful bid.
12. Post-Closing Day: After the IPO’s closing date, the stock exchange shares bidder details with the IPO registrar.
13. IPO Allotment: The registrar finalizes the IPO allotment process, determining the allocation of shares to each bidder.
14. Shares in Demat Account: The registrar transfers the allotted shares into the customer’s Demat (Dematerialized) account.
15. Listing Day Trading: On the listing day of the IPO, the customer has the option to sell the shares in their Demat account through the stock exchange.

Offline ASBA Application Process:

1. Download the ASBA Form: Begin by downloading the ASBA (Application Supported by Blocked Amount) form from the official websites of the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
2. Complete the Form: Fill in all the necessary details on the ASBA form as required. Ensure that you provide accurate and complete information.
3. Submission at Self-certified Syndicate Banks: Once the ASBA form is duly filled, submit it in person at the Self-certified Syndicate Banks (SCSBs). Along with the form, you may be required to provide a photocopy of the necessary identity proof documents for verification purposes.
4. Application Processing: Upon submission, the bank will process your ASBA application. They will send the application details to the relevant stock exchange for further processing.
5. Funds Blocking: The bank will proceed to block the specified bid amount in your bank account, as per your ASBA application. This ensures that the funds are reserved for the IPO.
6. Check Application Status: You can easily monitor the status of your ASBA application on both the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) websites. This allows you to stay updated on the progress of your IPO application.

By following these steps, you can successfully complete an offline ASBA application for participating in Initial Public Offerings.

What is an ASBA third party IPO application?

Many national-level banks provide ASBA IPO application services, making the process widely accessible. These banks include prominent institutions such as ICICI Bank, SBI, Kotak Bank, HDFC Bank, Axis Bank, and more.

Some banks, like SBI and Axis Bank, offer the option of 3rd Party IPO Applications. With this feature, these banks allow individuals to submit up to 5 IPO applications under different names while using a single bank account.

It’s important to note that within a single IPO, each person with a unique PAN Number is permitted to make only one application.

3rd Party IPO Application: There are different categories of banks offering ASBA IPO applications.

Banks offering 3rd Party IPO Application: Banks such as SBI, Axis, BoB (Bank of Baroda), and RBL offer the 3rd Party IPO application facility. With these banks, you can apply for up to 5 IPO applications using a single bank account. This allows you to apply on behalf of family members or friends, provided they have their own Demat accounts and PAN numbers.

This option is particularly useful for applying in an IPO on behalf of minors or Hindu Undivided Families (HUFs).

Banks offering Self IPO Applications Only: On the other hand, banks like ICICI Bank, HDFC Bank, and others provide a more restricted service, allowing only one IPO application per bank account. In such cases, the bank account, Demat account, and PAN number must all belong to the same individual.

Can my ASBA application form get rejected?

1. Insufficient Funds: Ensure that your bank account contains sufficient funds to cover the required transaction amount. If your account lacks the necessary funds, the issuer will reject your application.
2. Matching PAN and Demat Account: Verify that the PAN card number you provide matches the PAN associated with your Demat account. A mismatch can lead to application rejection.
3. Accuracy of Submitted Details: Avoid errors when submitting your application details. Inaccuracies or discrepancies in the information provided can result in rejection.
4. Consistency in Details: Ensure consistency in all provided details. Any variance or inconsistency discovered during the verification process may lead to rejection.
5. Multiple Applications: Submitting multiple applications for the same IPO, whether through ASBA or non-ASBA methods, can result in rejection. It’s important to adhere to the specified application limits and guidelines to avoid duplication.

Here is a list of banks that offer ASBA (Application Supported by Blocked Amount) services:

• AU Small Finance Bank Limited
• AXIS BANK LTD (formerly UTI BANK LIMITED)
• Bandhan Bank Limited
• Bank of Baroda
• Bank of India
• Bank of Maharashtra
• BARCLAYS BANK PLC
• BNP Paribas
• Canara Bank
• Central Bank of India
• CITI Bank
• City Union Bank Ltd.
• Credit Suisse AG, Mumbai Branch
• DBS Bank Ltd.
• Deutsche Bank
• Deutsche Bank AG
• Dhanlaxmi Bank Limited
• Equitas Small Finance Bank
• GP Parsik Sahakari Bank Limited
• HDFC Bank Ltd.
• ICICI BANK LTD. (formerly ICICI BANKING CORPORATION LTD)
• IDBI Bank
• IDFC First Bank
• INDIAN BANK
• Indian Overseas Bank Ltd.
• Indusind Bank Ltd.
• J. P. Morgan Chase, Bank, N.A.
• Jammu and Kashmir bank
• Janata Sahakari Bank Ltd
• Karnataka Bank
• Kotak Mahindra Bank Ltd.
• Mehsana Urban Co-operative Bank Limited
• Nutan Nagarik Sahakari Bank Ltd
• Punjab National Bank
• Rajkot Nagarik Sahakari Bank Ltd
• RBL BANK LIMITED (formerly THE RATNAKAR BANK LIMITED)
• South Indian Bank
• Standard Chartered Bank
• State Bank of India
• SVC Co-operative Bank Ltd.
• Tamilnad Mercantile Bank Ltd.
• The Ahmedabad Mercantile Co-Op. Bank Ltd
• THE FEDERAL BANK LIMITED
• THE HONGKONG & SHANGHAI BANKING CORPORATION LTD
• The Kalupur Commercial Co-operative Bank Ltd.
• THE KARUR VYSYA BANK LIMITED
• The Saraswat Co-operative Bank Ltd.
• The Surat Peoples Co-op Bank
• TJSB Sahakari Bank Ltd
• UCO Bank
• Union Bank of India
• Utkarsh Small Finance Bank Limited
• Yes Bank Ltd.

source-www.sebi.gov.in