Application Supported by Blocked Amount (ASBA)¶
ASBA, which stands for "Application Supported by Blocked Amount," is a process used in financial markets, particularly during the application for initial public offerings (IPOs) and other securities offerings. ASBA is designed to make the application and allotment process more efficient and secure for investors. Here's an explanation of how ASBA works:
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Authorization to Block Funds: When an investor applies for shares or securities in an IPO or a follow-on public offer (FPO) using ASBA, they provide an application to their bank or financial institution. This application authorizes the bank to block a specific amount of funds in the investor's bank account.
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Blocking of Application Money: The bank then "blocks" or sets aside the specified amount of money in the investor's account. This means that the funds are not available for withdrawal or any other use until the IPO allotment process is complete.
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Allotment Process: During the IPO allotment process, shares are allocated to investors. If the investor's application is selected for allotment, the necessary funds are debited from the blocked amount to pay for the allotted shares. If the application is not selected, the blocked funds are released, and the investor can access them again.
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Withdrawn/Failed Issues: In cases where the IPO is withdrawn or fails to go through, the blocked amount is unblocked and made available to the investor without any deduction or charges.
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