Application Supported by Blocked Amount (ASBA)

by Gopal Gidwani on November 5, 2010 · 28 comments

in Others,Stock Markets Guide,Uncategorized

Introduction
In the year 2007 when the stock markets were booming lot of new companies tapped the primary market to raise money by issuing shares through Initial Public Offerings (IPO’s). At that time a private company from a big industrial group came out with an IPO. The private company got tremendous response for their IPO. The overall oversubscription was by more than 100 times. The company’s shares listed at a huge premium to the offer price and the trading of shares closed with gains of more than 100% on the 1st day. Everybody who got the allotment of shares from retail investors or HNI’s to institutional investors rejoiced by doubling their money on the 1st day itself.

After reading the 1st paragraph you must be wondering why are we telling you all this and how is the story related to this article. Stellar gains made on the 1st day of the listing of the company is only the rosy side of the IPO story. There is a dark side also to participating in the IPO’s. Lot of investors who had applied for shares of the same company and made the full payment of around 1 lakh neither got the shares of the company nor did they get the refund of their money. Also some investors who got partial allotment of shares did not get the refund of their remaining money. There was mismanagement in the refund process and many people had to fight, do lot of follow ups and wait for months to get the refund of their hard earned money. Not getting refunds on time in IPO’s can lead to lot of agony, irritation and mental frustration. This is the dark side of applying in IPO’s using the traditional methods of applications like making application payment by Cheques, Demand Drafts or online debit to your bank account for the full application money. There have been lot of instances in the past where people have made full payment for shares in an IPO and then have neither got shares (or have got partial allotments) nor have got refund of their money for various reasons for months and sometimes even more than a year. Does the above situation sound scary to you? Don’t worry our intention is not to discourage you from applying for shares through an IPO. We just want to make you aware of an alternate method of applying for IPO’s where the above dangerous situation will not come.

Logic Behind Introducing ASBA
The stock market regulator Securities Exchange Board of India (SEBI) used to get lot of complaints about investors not getting their IPO refunds on time. This was happening for various reasons like mismanagement in the refund process, investors not updating their address properly in their demat accounts due to which the refunds cheques were not reaching them, investors not putting their MICR number on the application due to which direct credit of money to the investor’s bank account through ECS was not possible etc. So SEBI has come out with an alternate method of applying for IPO’s which is the Application Supported by Blocked Amount (ASBA) which co-exists with the traditional ways of applying for IPO’s like cheque, DD application or online bank account debit application wherein the entire money is debited before the allotment of shares happens.

But in the ASBA application process the money remains in your bank account, till the completion of the share allotment process and only the amount against which final shares are allotted to you is debited from your bank account. The remaining money never leaves your bank account and so the question of refund does not arise only. Your money always remains with you in your bank account till the shares are allotted to you. We are sure you will be very happy and excited to know about this method of IPO application. So without wasting any time further lets look at the details of the ASBA IPO application process.

What is ASBA (Application Supported by Blocked Amount)?
The ASBA facility has been introduced by SEBI in July 2008. ASBA is an alternate mode of applying for shares through an IPO. In case of applications made through the ASBA route the application money remains in the investor’s bank account until the allotment of shares is finalized. Even though the money lies in the investor’s bank account, this amount is blocked (lien is marked or hold is applied) and he cannot use this money till the hold is removed / released. The amount is unblocked / released once the share allotment process is complete and the investor is allocated shares and the proportionate amount is debited from his bank account in lieu of the shares allotted to him. After that the investor can use the remaining money as and when he wants. This is a great facility for investors who can earn interest on their money in the bank account whilst the share allotment is finalized. Also they need not bother about refunds as the money is debited from their account only for that amount for which they have been allotted shares. So the question of refunds does not arise only as the excess money never leaves the investor’s bank account. Initially the ASBA facility was introduced for retail investors and was later extended to other classes of investors.

Even though the ASBA facility was introduced in July 2008, the IPO of 20 Microns was the 1st IPO in which the ASBA facility was used in September 2008. In this public issue only 10% of the retail investors made use of the ASBA facility to apply for the shares of the company.

How to apply for shares in an IPO using the ASBA facility?
In order to make use of ASBA facility you need to have an account with a Bank recognized by SEBI for accepting ASBA applications. These Banks are referred to as Self Certified Syndicate Banks (SCSB’s). Almost all leading private and public sector banks are recognized as SCSB’s with SEBI. The entire list of SCSB banks is available on the SEBI website. You need to have the following things to make an application for shares in an IPO using the ASBA facility

  • Demat Account Details: At the time of making an application you need to give the details of your Depository Participant (DP). If you have an account with NSDL then your DP ID will be in the format IN-XXXXXX. For example if you have opened your Demat Account through IndiaBulls Securities Limited then your DP ID will be DP-302236. You also have to enter your Beneficiary Account Number or the Demat Account Number or the Client ID. This is an 8 digit number.
  • PAN Number: While making an application for an IPO through any mode you need to have a Permanent Account Number (PAN).
  • Bank Account: You will also need to have a bank account with one of the Self Certified Syndicate Banks (SCSB’s). You also need to make sure that you have the required funds to make an IPO application.
  • Details of the Shares to Bid for: While making an ASBA application you need to specify the number of shares you want to apply for and the price (per share) at which you want to make an application.
  • Mode of Application: ASBA application can be made online or by submitting the physical form to the SCSB. A number of banks provide their customers the facility to make an ASBA IPO application through internet banking. To make an online application you need to login to the bank website. You have to select the IPO company name. You need to enter your Demat Account details, PAN Number and the details of the shares you want to bid for and submit the application online. The funds in your bank account will be blocked immediately. In case you want to make a physical application then you will have to visit the SCSB bank branch, fill the ASBA form and submit it.

 
What if you want to modify / withdraw the Application?
In case you need to modify / withdraw the application prior to the Bid Closing Date then you can do so by submitting an application to the Bankers where you submitted the application.

In case you need to withdraw / modify the application after the Bid Closing Date then you can you can do so by submitting your request to the Registrar of the Issue. Once the allotment is finalized, no changes will be entertained.

Conclusion:
ASBA offers an Investor, friendly way of applying for IPO’s. ASBA has made the entire IPO process efficient and reduced the long IPO cycle. Also ASBA eliminates the need for refunds as the excess money over the allotment never leaves the investor’s bank account. Retail investors however are still not familiar with ASBA. With this article we hope to raise awareness about ASBA and the benefits it hold for investors. So the next time you want to apply for an IPO you know the best way to do that ………. ASBA Way!!!

Please let us know your comments on the article by commenting in the section below or writing to us at gopal_gidwani@yahoo.com

{ 28 comments… read them below or add one }

gopal November 6, 2010 at 7:15 am

Very informative account. This facility is really beneficial for investors who are keen in applying in IPO without taking risk of balance amount. I think stock brokers should market this facility as lots of investors still don’t know about this facility.

Thanks a lot.

Reply

Gopal Gidwani November 6, 2010 at 7:46 am

Hello Gopal,

I know this facility is very beneficial for retail investors. Since the time ASBA facility has been introduced I apply for IPOs only through ASBA. Its safe and very convenient. I also agree with you that lot of people dont know about this facility to apply for IPO’s and hence this article to create little bit awarness about it from our side.

Reply

jassi November 10, 2010 at 11:50 am

Nice information, described properly.

Previously for asba i’ve queried to my banker / my broker but no body given satisfactory/ useful information.

This blog really helped retail investors.

Reply

Gopal Gidwani November 11, 2010 at 7:11 am

Hi Jassi,
Thanks for your comments. I am glad to know that the website helped you. If you like the articles please share it with your friends.

Reply

Ashu November 12, 2010 at 9:50 am

Dear Gopal,

It’s true that ASBA is a great facility, but unfortunately brokers like Sharekhan are not marketing it at all, maybe due to the fact that they don’t get the commission. 🙁

Thanks
Ashu

Reply

Gopal Gidwani November 12, 2010 at 11:01 am

Hi Ashutosh,

You need not be dependent on your broker to apply for an IPO through ASBA. All you need to do it go to your bank, pick up the ASBA Form and fill the DP-ID and the beneficiary account number with the other details and submit it to your bank.

I agree that you have to take the trouble of going to the bank once for that, but I feel it is worth the effort rather than taking a chance of making the full payment and then waiting anxiously for the refund to come.

Many banks also offer the facility of making online ASBA applications from net banking. But unfortunately big banks like ICICI Bank and HDFC Bank are offering this online ASBA facilty only to their customers who have a Trading Account with their Depository Participant (DP) arm and not to their other customers.

Reply

Ashutosh November 12, 2010 at 11:05 am

Hi Gopal,

I have applied for ASBA through the online facility of HDFC Bank, but I think they are offering it to all the customers who have a savings account with them, but the DP account can be with any broker.

I have applied for ASBA through HDFC and I have the Demat account in sharekhan.

Cheers

Reply

Gopal Gidwani November 12, 2010 at 11:13 am

Hi Ashutosh,

Thats nice to hear. In my case when I tried clicking on the ‘online IPO’ link from my HDFC Net Banking account on two different occasions, both the times the link did not work. So I thought it was only for those customers who have a Trading Account with them.

Also I checked all the options / links in my ICICI Net Banking Account but could not find any ASBA Application link. Any idea on this whether ICICI Bank is offering online ASBA facility to their Saving Account Customers?

Reply

Ashutosh November 12, 2010 at 11:21 am

Hi,

HDFC netbanking works for me. 🙂

BTW – check this out

http://www.hdfcbank.com/personal/investments/ASBA/ASBA_elg.htm

Clearly says that the DP can be anything but we need to hold a savings/current account with them..

I dont know about ICICI, since I dont hold an account with them.

Cheers
Ashutosh

vikas kakkar December 16, 2010 at 2:40 pm

hi..

can you give me your mobile no. I have some query i think you have answer.

Thanks
vikas kakkar
vikakkar@rediffmail.com

Reply

Gopal Gidwani December 16, 2010 at 4:28 pm

Hi Vikas,

I have emailed you my mobile number

Reply

sanjay November 20, 2010 at 6:30 am

Sir,
with ASBA application when is the lien on my blocked money lifted if i get no allotment at all.Is their a fixed time period for this or i have to produce refund order to the bank.if it is later one,then in case i don’t get refund order in time what will happen?

Reply

Gopal Gidwani November 20, 2010 at 10:21 am

Hello Sanjay,
To lift the lien on your blocked money there is no need to produce any refund order. The bank lifts the lien on the bloked amount once the allotment process is over. The allotment process is completed within 15 days of the closing of the issue (last day of the IPO).

Best Regards
Gopal Gidwani

Reply

sanjay November 21, 2010 at 11:05 am

Sir,
thanks for reply.You mean to say lien is lifted as soon as company withdraws allotment money from my account or if no allotment then 15 days after the closure of IPO? How to get latest information about bank branches offering ASBA facility on net?I tried on net but i got old info.
Sanjay

Reply

Gopal Gidwani November 22, 2010 at 6:20 am

Hello Sanjay,

Once the allotment is decided and the shares are allotted to you, the appropriate amount is debited from your bank account and the lein / hold on the remaining amount is released. Also if there is no allotment then as soon as the allotment process is over (normally in 15 days) the lein / hold is released.
To get information on the bank branches offering ASBA facility I recommend going to the SEBI website. There you will get all the latest information.

Reply

anand patel December 1, 2010 at 4:57 pm

in the moil ipo i have written the dp id wrongly.what can i do now?i went to axis bank before bid closure,but they were not cooperating,they never allowed me to change or modify the bid which is allowed before book closure.kindly avoid these sort of banks who market there banking services like hell ,but the services are really pathetic.Staff is unresponsive and arrogant.

Reply

Gopal Gidwani December 2, 2010 at 11:23 am

Hello Mr. Anand,

Its sad to know that the Axis Bank staff did not allow you to modify the DP ID. You can lodge a complaint against Axis Bank with the Banking Ombudsman (You will get the details of the Ombudsman on the bank website) and you can also lodge a complaint against the bank with SEBI as it regulates the capital markets. You can lodge a complaint with SEBI on the SEBI Website.

Best Regards
Gopal Gidwani

Reply

shishal December 15, 2010 at 5:55 pm

Hi Gopal,

Today,I have apply for ipo using SBI ASBA online. while applying I have given my sharekhan DpId and clientId. My question is Once allotment is done Can I see my share in my sharekhan account?

Thanks in Advance.

Reply

Gopal Gidwani December 16, 2010 at 4:35 pm

Hi Shishal,

The 8 digit DP ID (INXXXXXX) given by NSDL is unique to every DP. So the DP ID IN300513 that you entered while filling the ASBA Form is unique to Sharekhan. So when shares will be alloted to you they will be sent to your DP (Sharekhan in your case). And based on the 8 Client ID or more appropriately 8 digit Beneficiary ID, Sharekhan will credit the shares to your account. So once allotment is done you will be able to see them in your Sharekhan Demat Account.

Best Regards
Gopal Gidwani

Reply

shishal December 16, 2010 at 8:47 pm

Thanks a lot Gopal.

Reply

Sanju December 28, 2010 at 2:46 am

I have applied 10 Lots of PSB IPO through ASBA HDFC, allotted nil as per link in time, but the amount is still frozen. When the freeze will be taken off ??? any idea

Reply

Gopal Gidwani December 28, 2010 at 3:28 pm

The allotment of shares was out on 28th December 2010. So the same day by afternoon or evening the funds are freed. Check by now the hold must have to lifted by the bank. I applied through ICICI Bank ASBA and the bank has already released the hold on the remaining funds after debiting the proportionate amount for the number of shares alloted.

Reply

dINESH August 15, 2011 at 1:54 pm

Dear Gopal,

really, it is wonder about ASBA article for al l new as wel as existing investors .

Good explaination .

Reply

Gopal Gidwani August 20, 2011 at 10:56 am

Hello Dinesh,
Thanks for your comment. It was good to know that the article was useful to you!!!

Reply

atul gupta February 26, 2012 at 3:21 pm

dear gopal,
hdfc bank me overdraft se physical asba application ho sakti hai ?

Reply

Anand Jain January 4, 2016 at 11:05 am

Demat accounts of my wife and my minor son are with Geojit and I have a savings account with HDFC bank. Can i use the HDFC bank account to apply IPOs in the name of my wife, minor son through ASBA ?

If yes, what is the procedure of doing so..

Thanks
Anand Jain

Reply

Jisan khoja February 26, 2017 at 6:37 am

I dont know what is beneficiary no. I use dp id, i use client in and also account number .
What i do ?

Reply

Gopal Gidwani November 13, 2010 at 6:17 am

Hi Ashutosh,

Thank You very much for the link. Unfortunately for me I tried their online IPO link on 2 separate occasions and it did not work both the times. So I opened a Trading Account with them and paid fees again for a new Trading Account 🙁

Reply

Leave a Comment

Previous post:

Next post: