ASBA Faciltiy by Banks
What is ASBA?
ASBA stands for Application Supported by Blocked Amount. It is a process developed by the India's stock market regular SEBI for applying IPO. In ASBA, an IPO applicant's account doesn't get debited until shares are allotted to them.
Earlier when an applicant wanted to apply an IPO, he was supposed to give a cheque of subscription amount. His amount used to be debited from his account. Once allotment process is done and an investor is allotted shares, his allotment amount used to be kept by the company and balanced refunded. In case of no allotment, full application amount used to be credited in applicant's account. In this arrangement, an applicant's money used to be debited for a few days. He used to loss the interest in such amount, if shares were not allotted to him.
In 2008, market regulator SEBI came with ASBA arrangement where an applicant's money would never be debited unless he is allotted shares. His amount shall be only blocked by bank till allotment process is done. If shares are allotted, subscription amount shall be debited else the same will be unblocked.
Both online and offline IPOs can be applied. In offline, an applicant fills up physical form with subscription and bank details. Then, form is submitted to the broker or bank.
In online arrangement, there are two important requirement apart from active demat account;
ASBA stands for Application Supported by Blocked Amount. It is a process developed by the India's stock market regular SEBI for applying IPO. In ASBA, an IPO applicant's account doesn't get debited until shares are allotted to them.
Earlier when an applicant wanted to apply an IPO, he was supposed to give a cheque of subscription amount. His amount used to be debited from his account. Once allotment process is done and an investor is allotted shares, his allotment amount used to be kept by the company and balanced refunded. In case of no allotment, full application amount used to be credited in applicant's account. In this arrangement, an applicant's money used to be debited for a few days. He used to loss the interest in such amount, if shares were not allotted to him.
In 2008, market regulator SEBI came with ASBA arrangement where an applicant's money would never be debited unless he is allotted shares. His amount shall be only blocked by bank till allotment process is done. If shares are allotted, subscription amount shall be debited else the same will be unblocked.
Both online and offline IPOs can be applied. In offline, an applicant fills up physical form with subscription and bank details. Then, form is submitted to the broker or bank.
In online arrangement, there are two important requirement apart from active demat account;
1. An applicant should have internet banking facility
2. An applicant's bank should be providing online IPO application facility.
In online ASBA arrangement, an investor can apply IPO by just click of mouse sitting in his home or office, in day or night, during opening and closing date and time.
I use Bank of Baroda and Kotak Bank ASBA facility. Both banks provide very good service. However, Kotak bank has limitation. It allows to do only one IPO application and that is too for the bank account holder.
In case of Bank Of Baroda, bank account holder can do five applications for five different demat account holders. Even account holder doesn't want to apply, he can do applications for others. An account holder has to update applicants details and can start subscribing. His bank balance will be blocked while application will be done in the name of demat account holder. If shares are allotted, bank account holders account will be debited and shares will be credited in the demat account of applicant whose application was done. Maximum you can do five IPO applications from a single bank account.
Bank of Baroda ASBA facility is very GOOD
2. An applicant's bank should be providing online IPO application facility.
In online ASBA arrangement, an investor can apply IPO by just click of mouse sitting in his home or office, in day or night, during opening and closing date and time.
I use Bank of Baroda and Kotak Bank ASBA facility. Both banks provide very good service. However, Kotak bank has limitation. It allows to do only one IPO application and that is too for the bank account holder.
In case of Bank Of Baroda, bank account holder can do five applications for five different demat account holders. Even account holder doesn't want to apply, he can do applications for others. An account holder has to update applicants details and can start subscribing. His bank balance will be blocked while application will be done in the name of demat account holder. If shares are allotted, bank account holders account will be debited and shares will be credited in the demat account of applicant whose application was done. Maximum you can do five IPO applications from a single bank account.
Bank of Baroda ASBA facility is very GOOD
Thank you for reading....Jai Hind
CA Prashant Seta
Vadodara. Gujarat. India
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