ASBA means “Application Supported by Blocked Amount”. ASBA is an application containing an authorisation to block the application money in the bank account, for subscribing to an issue (IPO). If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or the issue is withdrawn / failed.
It is a supplementary process of applying in Initial Public Offers (IPO), right issues and Follow on public offers (FPO) made through book building route and co-exists with the current process of using cheque as a mode of payment and submitting applications.
Benefits of ASBA
The investor need not pay the application money by cheque rather block his / her bank account to the extent of the application money, thus continue to earn interest on application money.
The investor does not have to bother about refunds, as in ASBA only an amount proportionate to the securities allotted is taken from the bank account when his / her application is selected for allotment after the basis of allotment is finalised.
The application form is simpler.
The investor deals with the known intermediary i.e. his or her own bank.
An “ASBA investors”, at the time of submitting ASBA application should provide correct information like:
Bank account number