ASBA, expanded as Applications Supported by Blocked Amount is a supplementary process developed by SEBI to applying for public issues or IPOs & FPOs. It co-exists with the current process of using cheque as a mode of payment and submitting applications. As per ASBA, the account of an IPO applicant doesn’t get debited until shares are allotted to them.
An ASBA process can be offered only by a SCSB (Self Certified Syndicate Bank).
As per SEBI guidelines, it is mandatory for the following applicants (who’ve applied in public/rights) to make use of ASBA facility:
- Non-retail investors or Qualified Institutional Buyers
- Non-Institutional Investors
As of Wikipedia:
ASBA process facilitates retail individual investors bidding at a cut-off, with a single option, to apply through Self Certified Syndicate Banks (SCSBs), in which the investors have bank accounts. SCSBs are those banks which satisfy the conditions laid by SEBI. SCSBs would accept the applications, verify the application, block the fund to the extent of bid payment amount, upload the details in the web based bidding system of NSE, unblock once basis of allotment is finalized and transfer the amount for allotted shares to the issuer.
ASBA is stipulated by SEBI, and available from most of the banks operating in India. This allows the investors money to remain with the bank till the shares are allotted after the IPO. Only then does the money transfer out of the investors account to the company. This eliminates the need for refunds on shares not being allotted.
Update: As on 3rd December 2012, 52 Banks are acting as SCSBs. Investors may submit their ASBA Applications to these SCSBs in order to apply for Public Issues. Some of the major SCSBs are Axis Bank, HDFC Bank, ICICI Bank, State Bank of India, Punjab National Bank, UCO Bank, IDBI Bank.