Promoting Retail Participation In IPOs: How ASBA is Changing the Game

Promoting Retail Participation In IPOs: How ASBA is Changing the Game


What does ASBA stand for?

ASBA stands for Application Supported by Blocked Amount and includes initial public offering (IPO) and follow on public offer (FPO) application processes in India. The Securities and Exchange Board of India (SEBI) introduced ASBA in 2008 to encourage small investors to apply for public issues.

ASBA registration has been compulsory for all retail investors since 1st January 2016. During this process, the application money is blocked in the investor's bank account. The amount is debited only if they are allotted shares in the IPO. The blocked money is released if shares are not allotted.

Read ahead for deeper insights into ASBA.

How does ASBA help retail investors?

ASBA has improved retail participation in IPOs by offering the following benefits:

  1. Paperless process

With ASBA, investors need not write cheques/demand drafts to transfer funds in advance for an IPO. They need not pay any fee for blocking money. Thus, the IPO application process has become cheaper, simpler, and time-saving.

  1. No risk

Before ASBA was introduced, investors risked losing their money if the allotment did not happen. They also lost interest income on the application amount during the waiting period. Thus, many investors did not put money into IPOs.

ASBA has removed the above-mentioned risks. Investors continue to receive interest on the blocked amount and can enjoy quick refunds if shares are not allotted. They no longer have to wait for their money. The risk of fraud is also lower.

  1. Transparency

ASBA has made the IPO allotment process transparent. Since investors block the money in advance, oversubscription is unlikely. There are low chances of an investor not getting a share allotment.

  1. Faster listing of shares

ASBA ensures the issuer gets the IPO proceeds soon after the share allotment. The issuers can start using the funds for business purposes. Thus, the timeline for stock listing decreases. It also allows applicants to place up to three bids using 1 PAN card.

  1. Simple application process

Investors can apply for ASBA online, offline, or through UPI. They can download the form from the NSE/BSE stock market websites. They must provide their name, PAN, demat and bank account details, as well as the bid quantity and price. After submitting the form, the bank blocks the amount in the investor's account. It also uploads details to the bidding platform.

For investing in IPOs, investors require a self-certified syndicate bank (SCSB) account. Federal Bank provides such accounts and investors can apply for IPOs and complete ASBA registration via their digital user-friendly platform Fednet.

  1. Flexibility

Investors can cancel their ASBA application until an IPO is open for bidding. The blocked amount is released on the next working day.

Final Thoughts

ASBA is a streamlined, efficient, and secure process. It protects the interests of small investors and thus is a boon.

Federal Bank offers an ASBA facility to all its customers. It also has a 24/7 customer support team to handle investor queries. So, open a savings/current account with Federal Bank today and submit ASBA and IPO applications effortlessly.