ASBA stands for “Application Supported by Blocked Amount.” It is a simple way to apply for an IPO (buy shares) where your money stays safe in your bank account and is only taken out if you get the shares.
How Does ASBA Work? (Simple Explanation)
Imagine you want to buy a toy but instead of giving the money right away, you ask the shopkeeper to keep the money safely for you until they confirm if the toy is yours. If you get the toy, they take the money; if not, they give the money back. ASBA works exactly like this but with money for shares.
- When you apply for an IPO using ASBA, the bank blocks the amount you want to pay. This means your money is kept safe but not taken out yet.
- You keep earning interest on that money, just like normal, because it is still in your bank account.
- After the IPO is finished, if you get the shares, the blocked money is debited (taken) from your account.
- If you don’t get the shares, the blocked money is unblocked and available for you to use again, immediately.
- You don’t have to worry about sending cheques or waiting for refunds.
Steps to Apply Using ASBA
- Log in to your bank’s internet banking or mobile app.
- Find the IPO Application section.
- Fill in your details (how many shares you want, price, demat account details).
- Authorize your bank to block the money.
- Submit your application.
- The money is blocked, but stays in your account until allotment.
- If you get shares, money is deducted; if not, money is released.
Why is ASBA Good?
- You don’t lose money upfront.
- You earn interest while the money is blocked.
- No waiting for refunds if shares are not allotted.
- Easy and fast online application.
- Safe and secure with your bank.
Example
You want to apply for 100 shares priced at ₹100 each. You ask your bank to block ₹10,000. The money stays in your account but is unseen to use right now. After the IPO, if you get the shares, ₹10,000 is taken from your account. If not, you get your ₹10,000 back immediately, with interest earned.
In short, ASBA is a safer, easier way to apply for IPO shares where your money stays in your bank account until you actually get the shares.
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