What is it?
Asba, or Application Supported by Blocked Amounts, is a relatively new facility that allows your application money in an initial public offer (IPO) to stay in your bank account till the shares get allotted to you. The money gets blocked in your account so that you can’t use it. Once the shares get allotted, the money gets debited from your account.
What’s good about it?
Earlier, you were required to pay at the time you invested in an IPO, even if it was Day 1. If the IPO was open for another four days and after a month the company informed you that you were not allotted any shares, you would get the application money back but lose the interest you could have earned in about a month. Through Asba, you keep earning the interest on the money till the time you are allotted shares.
Earlier, Asba was available to those investing directly in shares. The Securities and Exchange Board of India has now extended it to mutual fund investors. Asba doesn’t ensure allotment, however.
How to opt for it?
If you are bidding online, click on the Asba option while filling the application. If you are bidding offline, ensure that you pick the Asba bid-cum-application form. Its colour is different from the normal application form. Not all banks offer Asba, so do check with your bank. If you do not like Asba, you still have the option of giving a cheque.