Application Supported by Blocked Amount
Also called: ASBA · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
Application Supported by Blocked Amount (ASBA) is a way of applying for an IPO. The investor's money is not taken right away. It stays in their own bank account but is blocked, meaning the investor cannot spend it for now. It is debited only if shares are actually allotted. If no shares are allotted, the block is simply removed. The investor keeps earning interest on the money, and there is no wait for refunds.
Example
ASBA was introduced in 2008 and made mandatory in 2016. Since 2019, retail investors can block funds through UPI. A retail investor applies for Rs 15,000 worth of shares through UPI, and the Rs 15,000 is blocked in their account. They are allotted shares worth only Rs 5,000, so Rs 5,000 is debited and the remaining Rs 10,000 is released. Since December 2023, listing must happen by T+3, that is, three working days after the issue closes.
Related concepts
- Primary market
- Initial Public Offering
- Red herring prospectus
- Book building
- Anchor investor
- Qualified Institutional Buyer
- Green shoe option
- Underwriting
- Grey market premium
- Follow-on Public Offer