Gone are the days when IPO investors had to worry about getting back their refunds in time and loosing on the interest income for the money they invested in the IPO during the period from application to getting back the refund. SEBI has introduced the mechanism of ASBA which would act as a right step in providing relief to the IPO investors from worries of delay in refunds and loss of interest income.
What is ASBA ?
To put it in more simpler words, when you apply for an IPO now, you don’t have to pay the amount upfront. You just give an instruction to the bank to block the amount in your bank account to the extent of your application amount. So you don’t pay anything to the company. The application amount remains in your bank account and you continue to earn interest on it . The hold will be released once the allotment is made by the company. If you have got allotment, the amount to the extent of shares allotted would be debited to your account and the hold on balance of amount would be released. You cannot withdraw the amount of money blocked against an IPO application till the blocked amount is released on allotment/refund.
Currently the facility is available only to IPO’s with Book Building route. SEBI has issued a list of Self Certified Syndicate Banks (SCSB) who are authorized to accept ASAB application forms. Currently 10 banks have enrolled for providing this facility. Others are expected to enroll soon.
For those who apply for IPO through Online trading and their Banks are classified as SCSB, the option of applying through ASBA has been activated by default so you don’t need to take any additional steps.
Detailed Guideline from SEBI
List of SCSB’s
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