Sebi Says ASBA Application Will Be Processed Only After Money Is Blocked in Investor's Account 

Indian stock markets regulator Securities and Exchange Board of India (Sebi), on Monday, May 30, 2022, has issued a circular which prescribed the facility of Application Supported by Blocked Amount (ASBA) in Public Issues for all categories of investors. According to the circular, applications will be accepted only if it is backed with the required amount of money in the bidder’s bank account.

ASBA is an application by an investor containing an authorisation to block the application money in the bank account for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized.

Sebi has asked exchanges to ensure the money is blocked before processing the application. "Stock exchanges shall accept the ASBA applications in their electronic book building platform only with a mandatory confirmation on the application monies blocked," says Sebi in its circular.

Sebi further pointed out that these regulations will be applicable to all stakeholders involved in the process and are advised to take necessary steps to ensure compliance with this circular. Merchant bankers shall coordinate with all stakeholders in this regard. "The ASBA applications in public issues shall be processed only after the application monies are blocked in the investor’s bank accounts.

Accordingly, all intermediaries/market infrastructure institutions are advised to ensure that appropriate systemic and procedural arrangements are made within three months from the date of issuance of this circular," Sebi circular added. 

Sebi has prescribed the facility of ASBA in Public Issues for all categories of investors except Qualified Institutional Buyers (QIBs) in December 2009. Later it was extended to QIB too in May 2010.

Earlier, on November 01, 2018, Sebi introduced the use of Unified Payment Interface (UPI) as an additional payment mechanism with ASBA for Retail Individual Investors and the same was mandated with effect from July 01, 2019, for applications by Retail Individual Investors (RIIs) submitted through Intermediaries.

Interestingly, following occurrences during the IPO of Life Insurance Corporation (LIC), when certain applications had to be cancelled due to insufficient cash in bank accounts, Sebi has issued a new directive.

The circular shall be applicable for all categories of investors viz. Retail, QIB, Non Institutional investors (NII) and other reserved categories and also for all modes through which the applications are processed.

Sebi further noted that as a part of the continuing efforts to further streamline the bidding process and to ensure the orderly development of the securities market, a need has been felt to implement the ASBA process in line with the aforementioned circulars.