Few days ago I had applied for L&T Finance Holding and I came across a new concept ASBA.
What is ASBA?
ASBA (Applications Supported by Blocked Amount) is a new payment method using which you can apply for IPOs (Initial Public Offerings). It is available only for retail investors and is supported only by certain banks. Using ASBA, you can apply or subscribe to any IPO easily without paying any money upfront.
Which Banks offer ASBA?
Only Banks certified by SEBI, Self Certified Syndicate Banks (SCSBs), can offer the ASBA facility to their customers. There are now 53 such banks which offer this facility in India.
List of Banks offering ASBA in India
How does ASBA work?
ASBA (Applications Supported by Blocked Amount) allows you to apply for IPOs without paying any money upfront. Your money is just blocked by the bank until the IPO book building process is over and the share allotment is done (you cannot withdraw it until then). After that, the money is deducted from your account based on how many shares have been allotted to you. The remaining amount is unblocked immediately.
This is much better than the traditional way of applying for IPOs. You don’t need to send a cheque for applying to the IPO or wait for a refund when the allotment is over. You also keep receiving interest on the blocked amount under ASBA.
How to use ASBA for Applying to IPOs
1. If your bank is in the list of banks supporting ASBA (SCSBs), you just need to go to your bank’s website and register your CDSL or NSDL demat account under the ASBA facility by entering your account details.
2. You can then view a list of open IPOs and FPOs and submit your bids for it using ASBA. If your bids are valid, the bank will give you an acknowledgement number and your application is complete.
3. When the book building process is over, the shares allotted to you will be deposited to your demat account and the balance amount will be unblocked in your bank account.
More details about ASBA on BSE and NSE
