ASBA Full form in Banking is Application Supported by Blocked Account. ASBA is a procedure that was introduced by SEBI Securities and Exchange Board of India (SEBI) which allows investors to apply for their first public offering (IPOs) as well as other financial instruments without transfer the funds upfront. Instead, the funds are deposited in the account of the investor and only debited if the allotment is approved.
How ASBA Works
- Investors Apply: The investor submits an ASBA application to their bank, detailing how many shares as well as their bid prices.
- Funds Block: The corresponding amount is still blocked in the account of the investor, but is still earning interest.
- Allotment and debit: If shares are allotted, the total amount is debited. in case not, the block sum is let go.
- Shares Credited The shares that were allotted are added to the demat account of the investor.
Benefits of ASBA
- No upfront payment: Investors do not have to pay in advance for funds which reduces the risk of liquidity.
- Interest Retention Because funds are kept in the bank account of the investor until the time of allotment, interest is accrued.
- Removes Refund Process In the past, in traditional IPO applications refunds were mandatory for shares not allocated. ASBA helps to avoid this by preventing funds, instead of debiting the funds.
- Transparent and Secure: SEBI mandates ASBA for all IPOs, which ensures an efficient and secure process.
Eligibility for ASBA
- A candidate must hold an ASBA-enabled bank account at one that is ASBA certified.
- The application has to be made via the internet banking system mobile banking, net banking, or physically in the branch.
- The investor should have an debit account.
