The full form of ASBA is “Application Supported by Blocked Amount.”
ASBA is a system that allows investors to bid for shares in an Initial Public Offer (IPO) or a Follow-on Public Offer (FPO) using funds that are blocked in their bank accounts. The system was introduced by the Securities and Exchange Board of India (SEBI) to streamline the process of applying for and allocating shares in an IPO or FPO.
When an investor wants to bid for shares in an IPO or FPO, they can use the ASBA system to apply for the shares. The investor’s bank will block the required funds in the investor’s account, but the funds will not be transferred to the issuer until the shares are allotted. This eliminates the need for the investor to make a separate payment to the issuer and also eliminates the risk of non-allotment of shares.
The ASBA process starts with the investor visiting their bank branch with the necessary documents and filling out the ASBA application form. The bank then verifies the investor’s identity and confirms the availability of funds in the investor’s account. The bank then blocks the required amount in the investor’s account and submits the application to the issuer on behalf of the investor.
Once the allotment process is completed, the issuer will inform the bank of the number of shares allotted to the investor. If the investor is allotted the shares, the blocked funds will be transferred to the issuer and the shares will be credited to the investor’s demat account. If the investor is not allotted the shares, the blocked funds will be released back to the investor’s account.
In summary ASBA is a system that streamlines the process of applying for shares in an IPO or FPO by allowing investors to bid for shares using funds that are blocked in their bank accounts. This eliminates the need for investors to make a separate payment to the issuer and also eliminates the risk of non-allotment of shares.