When you are applying for an IPO (initial public offering) or a follow on public offer (FPO), rights issues or even a debt issue, you can make use of the State Bank of India's (SBI) ASBA, which is known as Application Supported by Blocked Amount. Under this facility, you stand to earn the prescribed interest during the application processing period of the public issue. So, let's say your application is approved after five months of application then your account will stand to be accrued during those five months. When the bid is finally made, the respective amount is debited and the allotted shares are transferred to the account holder.
Five things to know about SBI's ASBA
1. ASBA is a supplementary process for applying in public issues. ASBA facility can be used for Initial and Follow-on Public Offers (IPO and FPO), Rights Issues, and Debt Issues.
2. Under ASBA, funds will continue to earn interest during the application processing period, if held in an interest bearing account.
3. Under this process, bank will mark a lien on the deposit account of the investor to the extent of the application money. The lien will be removed immediately after finalization of the basis of allotment.
4. If bid is successful, the deposit account will be debited and the alloted shares will be transferred to the applicant's demat account.
5. An Investor can apply through ASBA, provided he/she is from any of the approved categories eligible to apply in IPO as per SEBI guidelines, maintains a Savings Bank or Current Account with SBI, has a Demat account with any of the DPs along with Permanent Account Number (PAN). The investor is also supposed to have sufficient clear credit balance in his/her Savings Bank or Current account for application money. ASBA facility is not available on any type of overdraft or loan accounts.
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