Apply IPOs through ASBA..!

Investment through the Initial Public offering (IPO) has been flair of the investors in India, for decades. This is also the primary step where in the investors learn investing in the stock market. Over the past decade it is observed that the participation of the retail investor for IPO has taken a large leap as they are proving to be an avenue to make quick money as the IPOs list at high premium to the issue price.
Retail investors are subscribing IPOs hand to hand and their increased participation is making the IPOs a success for the issuing company. Mostly the IPOs are oversubscribed i.e., more applications for the shares offered for sale by the company. It is almost certain that due to oversubscription, the investors will not get the number of shares they apply for in an IPO – most of the time two lots are alloted for four applied, one lot for five and sometimes nothing at all! Running in the race to apply for the shares in an IPO, investors run out of cheque leaves and also experience that the balance in the savings account has dip below the minimum balance required. Banks mostly charge penalties to the account holders who do not maintain a minimum balance. The securities market regulator and watch dog of the investor community in INDIA, the Securities and Exchange board of India (SEBI) has formulated a smarter way of investing in IPOs wherein you can make applications for IPOs with the amount residing in your account till the allotment is finalized. This way is called as “Application Supported by Blocked Amount” (ASBA). This facility can be an ‘Icing on the cake’ for the investors in the country.
ASBA- Application Supported by Blocked Amount is an application that authorizes the banker to block a specific sum of money in an individual's bank account for an IPO and debit the account only to the extent of the shares allotted to the individual. However, even as the blocked amount will not be available for use of the customer and he will continue to earn interest on it.
The benefits that an investor can derive from ASBA are
a) Cancelling and revising the bid is also possible.
b) The application amount is not debited from the savings account.
c) Keep earning interest on the amount parked in the Savings account. - List of SCSBs (including details Controlling Branch & Designated Branch)

Unlike the normal procedure where the debit happens immediately and the applicant needs to wait for refunds on a partial allotment, the ASBA route provides interest and saves time.
Now the question arises, how does one apply for ASBA?
Applying for ASBA
To bid in an IPO, the investor has to take either the e-route via on-line trading account or fill the physical form and submit it with his banker/broker. In the first scenario, taking an online investor into consideration, the process is very simple, he needs to just check the ASBA check-box in his screen (top brokerage houses provide ASBA facility for their online clients) and rest of the process is taken care of automatically. Whereas, if the investor takes the traditional way of applying to IPOs still, he needs to approach his banker (ASBA application forms can be downloaded from the NSE/BSE Web sites too) for an ‘ASBA Bid cum Application' form.
The applicant has to fill in basic details that include bank account number, PAN number, demat number, the bid quantity and bid price and submit the form with the banker (if the applicant is a Net banking client, he may be able to do this online itself). The banker then uploads details of the application in the bidding platform and simultaneously blocks the amount in the client's account. What is to be noted here is that not all banks have ASBA facility; only self certified syndicate banks (SCSBs) offer this.
List of SCSBs is given as a link below. To name a few, State Bank of India, HDFC Bank, AXIS Bank, ICICI Bank, Bank of India, Kotak Mahindra Bank, Standard Chartered Bank etc., are among those offering the facility. The best thing in this way of applying is that currently most brokers and bankers offer this service free of cost for their clients. They collect the selling commission or the processing fee from merchant bankers of the issue.
 
With ASBA applications just kicking off, there has been queries as to whether one can apply at the cut-off price and if the place bids can be revised. The answer is: Yes, one can do that. “The investor has the option of revising and even cancelling the bid till the cut-off time on the last day of the issue”. The process is simple and doesn't require much of a doing.
Process to be complied:
The investor need to have a current/savings account with one of the SCSBs to be able to apply via ASBA route in IPOs. While accessing this route the investor should ensure that he makes sufficient amount is available in his account while making the application. Once the process is complete, the banker sends in an acknowledgement which should be filed and kept for future reference.
Recently, brokerage houses have also been given the ‘green' signal by SEBI to distribute ASBA forms. So now you needn't even walk up to the bank for an ASBA application; you can send it through your broker (not all brokerages currently offer this service).

Important Links:

- To register with the Exchange as Self certified syndicate banks, the bank has to submit an undertaking as per the prescribed format.
- Investors, wishing to apply the E-route or Online trading account click here