Chapter 14: Application Supported by Blocked Amount (ASBA)

Before the introduction of ASBA, applying for a public issue required investors to draw a physical bank draft or cheque for the full application amount and submit it with a paper application form. The money was debited immediately from the investor's bank account into the issuer's escrow account. If the issue was oversubscribed and the investor received partial or zero allotment, refund cheques were sent via physical mail. This frequently resulted in postal delays, lost cheques, and prolonged loss of bank interest.

To resolve these challenges, SEBI introduced Application Supported by Blocked Amount (ASBA).

• Core Mechanism: Under ASBA, the investor's application money does not leave their bank account at the time of bidding. Instead, the application funds are marked with a temporary lien (hold/block) inside the investor's own bank account.
• Interest Benefit: Because the money remains in the investor's savings account, it continues to earn bank interest throughout the entire subscription and allotment period.
• Zero Refund Drag: The issuing company debits only the exact amount corresponding to the shares actually allotted. If no shares are allotted, the lien is unblocked immediately, eliminating the need for refunds.

ASBA services are provided by Self-Certified Syndicate Banks (SCSBs)—scheduled commercial banks registered with SEBI that satisfy statutory technical and operational criteria.

Routes for Submitting an ASBA Application

1. Physical ASBA Route: The investor downloads and prints the physical bid application form, fills in their details (Demat Client ID, DP ID, PAN, bid quantity, price), and submits it at an authorized SCSB branch. The bank branch blocks the amount and uploads the bid to the exchange bidding system.
2. Internet Banking ASBA (Net Banking): Most major SCSBs provide online ASBA portals within their net banking dashboards. Investors log in, select the active IPO, enter their demat credentials and bid details, and authorize the hold directly using bank two-factor authentication.
3. UPI-based ASBA for Retail Investors: Enables retail investors to submit IPO applications through their stock broker's mobile or web trading platform using their Unified Payments Interface (UPI) ID.

The integration of UPI with the ASBA mechanism has made retail IPO participation largely mobile and paperless:

• Monetary Threshold: Retail investors can apply for IPOs via UPI for bid amounts up to Rs. 5,00,000 (Rs. 5 Lakhs) per application (enhanced by SEBI and NPCI from Rs. 2 Lakhs).
• Mandate Workflow:
  1. The investor places a bid on their broker's app and enters their UPI ID (VPA).
  2. The exchange bidding system routes a UPI Mandate Request to the investor's UPI app (BHIM, Google Pay, PhonePe, Paytm, etc.).
  3. The investor opens their UPI app, verifies the company name, bid amount, and merchant details, and enters their UPI MPIN to authorize the block.
  4. The bank creates a lien on the funds, and the bid is confirmed on the exchange engine.
• Crucial Rule: The UPI mandate must be created from a bank account that stands in the exact name of the PAN holder applying for the IPO. Bids using third-party UPI accounts are automatically rejected during exchange validation.