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What is ASBA mode of payment for IPO?

Published on Tuesday, January 19, 2016 by Dilip Davda | Modified on Monday, July 22, 2019

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In old days, besides normal mode of cash or cheque payment along with IPO application, Stock Invest was introduced and was welcomed, but finally it was closed due to misuse of it by scrupulous operators and thus a boon in favor of retail investors has seen premature death.

In 2008, SEBI introduces ASBA mode i.e. an Application Supported by Blocked Amount for retail investors. ASBA system ensured that the applicant's money remains in his/her bank account till the shares are allotted. Now it has been extended to corporate investors and HNIs as well (from January 1, 2010, onwards).

The mechanism requires the applicant to give an authorization to block his/her application money in the bank account for subscribing to the IPO. His/her bank account is debited only after the basis of allotment is finalized, or the IPO is withdrawn or fails. In case of rights issue, the application money is debited after the receipt of instructions from the Registrars. Now Investors have to just mention their account details on the application form and submit it to the merchant bankers/brokers and their account will get debited on the basis of allotment, if any or else their money will remain in their banks.

In the process, ASBA was made mandatory for QIBs and HNIs for all IPOs and now from 01.01.2016 it is made mandatory across the segment i.e. QIBs, HNIs and Retail investors. Also IPOS listing time reduced from 12 working days to 6 working days.

Branches of Self Certified Syndicate Banks (SCSBs) where syndicate and non-syndicate member to submit ASBA form

NOTE: PRECISION CAMSHAFTS LTD IS THE FIRST IPO UNDER NEW IPO REGIME OF MANDATORY ASBA MODE ACROSS THE BOARD AND LISTING AFTER SIX WORKING DAYS POST CLOSURE OF THE ISSUE. ALL EYERS ARE ON IT FOR NOW.

If investors have their account in banks not listed above, they may not be able to participate in IPOs, opined a senior manager from broking house who preferred to be anonymous.

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About Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com


4 Comments

4. Dhiraj nandu  Sep 17, 2017 11:24 I Like It. 1 | Report Abuse Reply
why asba fasility not available in KARNATAKA BANK
3. Uraheja2000  Jan 28, 2016 21:52 I Like It. | Report Abuse Reply
Dear SIr
@ Dilip Davda
since Asba is made now compulsory , pl can u tell is it correct that 5 applications can be made from one asba bank a/c in names of 5 different names ,
also pl let me know is it not risky too as anybody having copy of cheque can forge my signature and apply in his name
sunil raheja
2. Dilip Davda  Jan 26, 2016 17:21 I Like It. | Report Abuse Reply
See the link for latest ASBA bank list as per SEBI:
http://www.sebi.gov.in/sebiweb/home/detail/32791/yes/List-of-Self-Certified-Syndicate-Banks-under-the-ASBA-facility

Keep checking this regularly for latest updates


Dilip Davda
1. Nagesh  Jan 20, 2016 08:53 I Like It. | Report Abuse Reply
One sb a/c se kitne ipo application lag sakti h.