The full form of ASBA in banking is Application Supported by Blocked Amount. ASBA is a process introduced by the Securities and Exchange Board of India (SEBI) that allows investors to apply for initial public offerings (IPOs) and other financial instruments without actually transferring the money upfront. Instead, the required funds are blocked in the investor’s bank account and debited only if the allotment is made.

How ASBA Works

  1. Investor Applies: The investor submits an ASBA application through their bank, specifying the number of shares and the bid price.
  2. Funds Blocked: The corresponding amount remains blocked in the investor’s account but continues to earn interest.
  3. Allotment & Debit: If shares are allotted, the exact amount is debited, and if not, the blocked amount is released.
  4. Shares Credited: The allotted shares are credited to the investor’s demat account.

Benefits of ASBA

  • No Upfront Payment: Investors don’t need to transfer funds in advance, reducing liquidity risk.
  • Interest Retention: Since funds remain in the investor’s bank account until allotment, interest accrues.
  • Eliminates Refund Process: In traditional IPO applications, refunds were required for unallotted shares. ASBA avoids this by blocking funds instead of debiting them.
  • Secure and Transparent: SEBI mandates ASBA for all IPOs, ensuring a streamlined and secure process.

Eligibility for ASBA

  • The applicant must have a bank account with an ASBA-enabled bank.
  • The application must be submitted through net banking, mobile banking, or a physical form at the bank.
  • The investor must hold a demat account.