ASBA Full Form & Meaning: All You Need to Know

Are you confused about the meaning of ASBA? Do you want to know more about ASBA’s full form and what it means? Look no further, as this article will provide you with all the necessary information about ASBA including ASBA full form and its meaning.

When it comes to investing in the stock market, one of the most important things to understand is the process of applying for shares. One way of doing this is through the ASBA process, which is used for initial public offerings (IPOs) and rights issues.

What is ASBA?

ASBA stands for “Application Supported by Blocked Amount”. It is a process of applying for shares in an IPO or a rights issue where the application amount is blocked in the applicant’s bank account until the shares are allotted.

ASBA Full Form

ASBA stands for “Application Supported by Blocked Amount”.

How does ASBA work?

When an investor applies for shares through the ASBA process, the application amount is blocked in their bank account, but the actual amount is not debited until the shares are allotted. This means that the investor can continue to earn interest on the blocked amount until the shares are allotted.

Benefits of ASBA

There are several benefits of using the ASBA process for investing in IPOs and rights issues. These include:

  • Convenience: The process is simple and convenient, as the investor does not need to issue cheques or transfer funds.
  • No chance of rejection: The application amount is blocked, so there is no chance of rejection due to insufficient funds.
  • Interest: The investor continues to earn interest on the blocked amount until the shares are allotted.
  • Faster refunds: In case the shares are not allotted, the blocked amount is unblocked and refunded quickly.

Differences between ASBA and IPO

ASBA is a process of applying for shares in an IPO or a rights issue, while IPO refers to the first time a company offers its shares to the public.

ASBA is a more efficient and convenient way of applying for shares in an IPO, as it eliminates the need for issuing cheques or transferring funds.

How to apply for ASBA?

To apply for shares through the ASBA process, an investor needs to follow these simple steps:

  1. Open a bank account with a bank that offers the ASBA facility.
  2. Get a unique client identification number (UCIN) from the bank.
  3. Fill out the ASBA application form, providing details such as name, PAN, and the number of shares applied for.
  4. Submit the application form to the bank along with a cheque or a letter of authorization for blocking the application amount.
  5. The bank will then block the application amount in the investor’s bank account.
  6. If the shares are allotted, the amount will be debited from the investor’s account. If not, the amount will be unblocked and refunded.

ASBA and Online Trading

ASBA is a convenient way of applying for shares in an IPO or a rights issue, and it is also compatible with online trading platforms.

This means that investors can apply for shares through the ASBA process using their online trading account, which eliminates the need for physical application forms.

ASBA and Mutual Funds

ASBA can also be used for investing in mutual funds. When applying for mutual fund units through the ASBA process, the application amount is blocked in the investor’s account until the units are allotted.

This means that the investor can continue to earn interest on the blocked amount until the units are allotted.

ASBA and Banking

ASBA is a process that involves both the investor and the bank. Banks that offer the ASBA facility are responsible for blocking and unblocking the application amount, as well as for ensuring that the shares or units are allotted or refunded. Banks also charge a fee for providing the ASBA facility, which varies from bank to bank.

ASBA and SEBI

The Securities and Exchange Board of India (SEBI) is the regulatory body that governs the securities market in India. SEBI has mandated the use of ASBA for all public issues, as it is a more efficient and convenient way of applying for shares in an IPO or a rights issue.

FAQs on ASBA

Is ASBA mandatory for applying for shares in an IPO or a rights issue?

Yes, SEBI has mandated the use of ASBA for all public issues.

Can I earn interest on the blocked amount when applying for shares through ASBA?

Yes, the investor continues to earn interest on the blocked amount until the shares or units are allotted.

Can I apply for shares through ASBA using my online trading account?

Yes, ASBA is compatible with online trading platforms.

Do all banks offer the ASBA facility?

No, only banks that are registered with SEBI and have been authorized to provide the ASBA facility can offer it to investors.

How much fee do banks charge for providing the ASBA facility?

The fee charged by banks for providing the ASBA facility varies from bank to bank.

Conclusion

In conclusion, ASBA is a convenient and efficient way of applying for shares in an IPO or a rights issue.

The application amount is blocked in the investor’s account, which eliminates the need for issuing cheques or transferring funds.

ASBA is also compatible with online trading platforms, which makes it even more convenient for investors.

The process is regulated by SEBI and is offered by banks that charge a fee for providing the ASBA facility.

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