ASBA

Appplyng in IPOs couldn't be easier!

How many of you forgo investment opportunities in IPOs because of the notoriously long queues and the equally annoying application procedures? Add to that the annoying need to keep track of all your applications and again queuing up to collect refunds for amounts not allotted as shares. Good news for you! Gone are the days of cumbersome IPO applications because of the new ASBA system.

What is ASBA?

Application Supported by Blocked Amount – in short ASBA – is a very simple process to apply in public issues like IPOs (Initial Public Offerings) and FPOs (Further Public Offerings). Applications for IPOs and the like can be made by simply ‘blocking’ the application amount in your bank account. You needn’t sign a cheque and there will be no transfer of funds.  For example if you have, say, fifty thousand in your bank account and seek to apply for shares equivalent to forty thousand, you go to a bank branch providing the service and ask for the relevant application form. You fill the form and the branch will give you a receipt confirming to ‘freeze’ of forty thousand. You will not be able to use the amount till allotment but you keep earning interest. You also need not fill multiple forms– one form will do the entire job for you.

What are the benefits?

Apart from saying goodbye to long queues, you need not worry about managing your funds. They remain in your account and earn interest. You also need not worry about buying application forms as they will be available at bank branches providing this service. The only downside is the nominal fee that you’ll have to pay for the service provided – a hundred rupees for small retail investors and higher for larger ones – but the interest you earn should cover the cost. All branches that provide ASBA will be your go-to place for any IPO or FPO in the future. Your only contact point will be your familiar branch office who will take up the entire responsibility of collecting, verifying and delivering your application.

What do I need to avail this service?

The Securities Exchange Board (SEBON) is planning to make the system compulsory in the near future. Availing of the service is quite easy. You only need a Savings or Current account in a bank enlisted by SEBON for this facility. Also, provided that you have sufficient balance, you can apply in multiple public issues through a single account. All your documents including citizenship and photograph will already be available at your bank branch and you only need to provide your DEMAT number to complete your application.

ASBA is a very simple way to apply for shares as opposed to the complicated process.  ASBA is also forward-looking as it is designed to shorten the listing process which is good for all investors.