11

Application Supported by Application Supported by Blocked Amount (ASBA)Blocked Amount (ASBA)

By:By:

Prof. Mallikarjun BaliProf. Mallikarjun BaliBLDEA’s VP Dr. P G H CETBLDEA’s VP Dr. P G H CET BijapurBijapur

22

Facts and FiguresFacts and Figures BSE BSE NSE NSE

Cash trading began in Cash trading began in July, 1875 July, 1875 Nov., 1994 Nov., 1994

Derivatives trading Derivatives trading began in began in

June, 2000 June, 2000 June, 2000 June, 2000

Number of listed Number of listed companies companies

5054 5054 24762476

Cities present in Cities present in 324324 14861486

Market capitalization Market capitalization (Rs. In Cr.)(Rs. In Cr.)

63.4 lakh 63.4 lakh 61.9 lakh 61.9 lakh

33

How households shifted their How households shifted their savings:savings:

2000-05

Others, 1.2Shares and

debentures, 2.8Claims on

government , 19.5

Currency , 8.9

Provident and pension fund,

15.1Life insurance,

14.7

Bank Deposits, 37.8

2005-11

Bank Deposits, 49.9

Life insurance, 19.9

Provident and pension fund,

10.3

Currency , 10.7

Others, 1.4Claims on

government , 3.5

Shares and debentures, 4.3

44

Introduction:Introduction: ASBA (Applications Supported by Blocked Amount) is an ASBA (Applications Supported by Blocked Amount) is an

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allotment after the basis of allotment is finalized, or the issue is basis of allotment is finalized, or the issue is withdrawn/failed.withdrawn/failed.

ASBA is an additional mode of payment introduced by SEBI ASBA is an additional mode of payment introduced by SEBI in July 2008 for easing up the process of applying in the in July 2008 for easing up the process of applying in the Public Offer and making the process more efficient. For the Public Offer and making the process more efficient. For the purpose, SEBI has amended the SEBI (Disclosure and purpose, SEBI has amended the SEBI (Disclosure and Investor Protection) Guidelines, 2000. This process is Investor Protection) Guidelines, 2000. This process is available in all public issues made through the book available in all public issues made through the book building route. This process Co-Exists with the Current building route. This process Co-Exists with the Current process where the cheques are used as a mode of payment.process where the cheques are used as a mode of payment.

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Key FeaturesKey Features

Easy to apply in IPO/FPO/Rights Issue Easy to apply in IPO/FPO/Rights Issue through Net Banking or Physical through Net Banking or Physical formateformate

Enjoys continued Returns on Blocked Enjoys continued Returns on Blocked Amount Amount

Option to revise/withdraw the bid Option to revise/withdraw the bid

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Benefits of ASBA:Benefits of ASBA: No loss of interest, since the application amount is not debited to No loss of interest, since the application amount is not debited to

the savings account on application. the savings account on application.

The amount for which no shares have been allotted is available The amount for which no shares have been allotted is available immediately on completion of allotment process. There is no need immediately on completion of allotment process. There is no need to wait for the amount to be refunded by the company and be to wait for the amount to be refunded by the company and be credited to the account. credited to the account.

Since the amount is available in the account, it is considered for Since the amount is available in the account, it is considered for calculation of the Average Quarterly Balance (AQB).calculation of the Average Quarterly Balance (AQB).

Multiple bidding facility is available to the Customer. In other Multiple bidding facility is available to the Customer. In other words Five applications can be made from a bank account per words Five applications can be made from a bank account per issue.issue.

Customer can revise/withdraw the bid before/after the end of the Customer can revise/withdraw the bid before/after the end of the Issue in the prescribed format with the Bank. Issue in the prescribed format with the Bank.

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Who can avail ASBAWho can avail ASBA facility?facility?

Any investor who satisfies the below Any investor who satisfies the below conditions is eligible and can apply conditions is eligible and can apply for shares under ASBA mode: for shares under ASBA mode:

All Categories - Retail as well as Non-Retail All Categories - Retail as well as Non-Retail InvestorsInvestors

Holds a savings/current account with the Holds a savings/current account with the Self Certified Syndicate Bank (SCSB)Self Certified Syndicate Bank (SCSB)

Has a valid PAN card.Has a valid PAN card.

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Process for Submitting Bid Through Process for Submitting Bid Through

ASBA MechanismASBA Mechanism An ASBA investor, intending to subscribe to a book built public An ASBA investor, intending to subscribe to a book built public

issue, shall submit a completed ASBA form to a Self Certified issue, shall submit a completed ASBA form to a Self Certified Syndicate Bank (SCSB), with whom the bank account is Syndicate Bank (SCSB), with whom the bank account is maintained, through one of the following modes – maintained, through one of the following modes – • Submit the form physically with the Designated Branches (DBs) of the Submit the form physically with the Designated Branches (DBs) of the

SCSB SCSB (Physical ASBA) or(Physical ASBA) or

• Submit the form electronically through the internet banking facility Submit the form electronically through the internet banking facility offered by the SCSB (Electronic ASBA).offered by the SCSB (Electronic ASBA).

The SCSB shall give an acknowledgement specifying the The SCSB shall give an acknowledgement specifying the application number to the ASBA investor, as a proof of having application number to the ASBA investor, as a proof of having accepted his/her ASBA in a physical or electronic mode.accepted his/her ASBA in a physical or electronic mode.

If the bank account specified in the ASBA does not have sufficient If the bank account specified in the ASBA does not have sufficient credit balance to meet the application money, the ASBA shall be credit balance to meet the application money, the ASBA shall be rejected by the SCSB.rejected by the SCSB.

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Process for Submitting Bid Through Process for Submitting Bid Through ASBA Mechanism (Cont.)ASBA Mechanism (Cont.)

After accepting a Physical ASBA, the SCSB shall block funds After accepting a Physical ASBA, the SCSB shall block funds available in the bank account specified in the Physical available in the bank account specified in the Physical ASBA, to the extent of the application money specified in ASBA, to the extent of the application money specified in the ASBA. The SCSB shall then capture/upload the following the ASBA. The SCSB shall then capture/upload the following details in the electronic bidding system provided by the details in the electronic bidding system provided by the Stock Exchanges(s) for the particular public issue:Stock Exchanges(s) for the particular public issue:• Application numberApplication number• DP ID, Client IDDP ID, Client ID• Bid QuantityBid Quantity• PANPAN

In case of an Electronic ASBA, the ASBA investor In case of an Electronic ASBA, the ASBA investor himself/herself shall fill in all the above mentioned details, himself/herself shall fill in all the above mentioned details, except the application number which shall be system except the application number which shall be system generated. The SCSB shall thereafter upload all the above generated. The SCSB shall thereafter upload all the above mentioned details in the electronic bidding system provided mentioned details in the electronic bidding system provided by the Stock Exchange(s).by the Stock Exchange(s).

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Process for Submitting Bid Through Process for Submitting Bid Through ASBA Mechanism (Cont.)ASBA Mechanism (Cont.)

The SCSB (Controlling Branch (CB) or DBs) shall generate a The SCSB (Controlling Branch (CB) or DBs) shall generate a Transaction Registration Slip/ Order number, confirming Transaction Registration Slip/ Order number, confirming upload of ASBA details in the electronic bidding system of upload of ASBA details in the electronic bidding system of the Stock Exchange(s). The Transaction Registration the Stock Exchange(s). The Transaction Registration Slip/Order number shall be given to the ASBA investor as a Slip/Order number shall be given to the ASBA investor as a proof of uploading the details of ASBA, only on demand.proof of uploading the details of ASBA, only on demand.

In case an ASBA investor wants to withdraw his/her ASBA In case an ASBA investor wants to withdraw his/her ASBA during the bidding period, he/she shall submit his/her during the bidding period, he/she shall submit his/her withdrawal request to the SCSB, which shall do the withdrawal request to the SCSB, which shall do the necessary, including deletion of details of the withdrawn necessary, including deletion of details of the withdrawn ASBA from the electronic bidding system of the Stock ASBA from the electronic bidding system of the Stock Exchange(s) and unblocking of funds in the relevant bank Exchange(s) and unblocking of funds in the relevant bank account.account.

The Stock Exchange(s) shall make available the updated The Stock Exchange(s) shall make available the updated electronic bid file to the Registrar to the Issue.electronic bid file to the Registrar to the Issue.

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Process for Submitting Bid Through Process for Submitting Bid Through ASBA Mechanism (Cont.)ASBA Mechanism (Cont.)

The SCSB shall send the following aggregate information to the Registrar to The SCSB shall send the following aggregate information to the Registrar to the Issue after closure of the biding period. the Issue after closure of the biding period.

• Total number of ASBAs uploaded by the SCSBTotal number of ASBAs uploaded by the SCSB

• Total number of shares and total amount blocked against the uploaded ASBAs.Total number of shares and total amount blocked against the uploaded ASBAs.

The Registrar to the Issue shall inform each SCSB about errors, if any, in The Registrar to the Issue shall inform each SCSB about errors, if any, in the bid details, along with an advice to send the rectified data within the the bid details, along with an advice to send the rectified data within the time as specified by the Registrar.time as specified by the Registrar.

In case an investor wants to revise or withdraw his/her ASBA before the bid In case an investor wants to revise or withdraw his/her ASBA before the bid closer date, he/she can submit bid revision or withdrawal request to the DBcloser date, he/she can submit bid revision or withdrawal request to the DB

In case an ASBA investor wants to withdraw his/her ASBA after the bid In case an ASBA investor wants to withdraw his/her ASBA after the bid closing date, he/she shall submit the withdrawal request to the Registrar to closing date, he/she shall submit the withdrawal request to the Registrar to the Issue. The Registrar shall delete the withdrawn bid from the bid file.the Issue. The Registrar shall delete the withdrawn bid from the bid file.

The Registrar to the Issue shall finalize the basis of allotment and submit it The Registrar to the Issue shall finalize the basis of allotment and submit it to the Designated authority for approval.to the Designated authority for approval.

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Process for Submitting Bid Through Process for Submitting Bid Through ASBA Mechanism (Cont.)ASBA Mechanism (Cont.)

Once the basis of allotment is approved by the Once the basis of allotment is approved by the Designated authority, the Registrar to the Issue Designated authority, the Registrar to the Issue shall provide the following details to the CB of shall provide the following details to the CB of each SCSB, along with instructions to unblock the each SCSB, along with instructions to unblock the relevant bank accounts and transfer within the relevant bank accounts and transfer within the timelines specified in the ASBA process;timelines specified in the ASBA process;• Number of shares to be allotted against each valid ASBANumber of shares to be allotted against each valid ASBA• Amount to be transferred from the relevant bank Amount to be transferred from the relevant bank

account to the issuer’s account, for each valid ASBAaccount to the issuer’s account, for each valid ASBA• The date by which the funds shall be transferred to the The date by which the funds shall be transferred to the

issuer’s accountissuer’s account• Details of rejected ASBAs, if any, along with reasons for Details of rejected ASBAs, if any, along with reasons for

rejection and details of withdrawn/unsuccessful ASBAs, if rejection and details of withdrawn/unsuccessful ASBAs, if any, to enable SCSBs to unblock the respective bank any, to enable SCSBs to unblock the respective bank accounts.accounts.

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Process for Submitting Bid Through Process for Submitting Bid Through ASBA Mechanism (Cont.)ASBA Mechanism (Cont.)

SCSBs shall unblock the relevant bank accounts SCSBs shall unblock the relevant bank accounts for,for,• Transfer of requisite money to the issuer’s account Transfer of requisite money to the issuer’s account

against each valid ASBAagainst each valid ASBA• Withdrawn/rejected/unsuccessful ASBAsWithdrawn/rejected/unsuccessful ASBAs

The CB of each SCSB shall confirm the transfer of The CB of each SCSB shall confirm the transfer of requisite money against each successful ASBA to requisite money against each successful ASBA to the Registrar to the Issue.the Registrar to the Issue.

The Registrar to the Issue shall credit the shares The Registrar to the Issue shall credit the shares to the demat account of the successful ASBA to the demat account of the successful ASBA investors.investors.

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Submission of ASBA Physically or Electronically to SCSB

Blocking the Application Amount by SCSB in Specified Account

Application Money to be Blocked until finalization of Allotment

Uploading the Application Data by SCSB in the Electronic Bidding System

On Allotment, Unblocking the Relevant Bank Account and Transfer of Requisite Amount Issuer’s Account

Process for Submitting Bid Through ASBA Mechanism

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Differences between Existing and New Method:Differences between Existing and New Method:

Particulars Particulars Existing MethodExisting Method New MethodNew Method

Submission of BidSubmission of Bid Through the investor’s brokerage Through the investor’s brokerage firm. firm.

Through the SEBI registered Through the SEBI registered bankers.bankers.

Payment MethodPayment Method Through the cheque and to be Through the cheque and to be submitted along with submitted along with application.application.

It is not necessary to make It is not necessary to make payment at the time of payment at the time of submitting of bid. However, submitting of bid. However, the banker will simply the banker will simply block the amount at the time block the amount at the time of uploading the details in of uploading the details in the bidding platform.the bidding platform.

Earning of InterestEarning of Interest Here, the investor earns no Here, the investor earns no interest.interest.

Here, the investor continues to Here, the investor continues to earn interest as the amount earn interest as the amount is with the banker.is with the banker.

RefundRefund Here, the company will have to Here, the company will have to refund the amount to the refund the amount to the investor within the time limit investor within the time limit

No question of refund.No question of refund.

Impact of ListingImpact of Listing As company can not list its share As company can not list its share before entire process of issue before entire process of issue is completed including is completed including refund, which delays the refund, which delays the listing.listing.

As there is no question of As there is no question of refunding, so it causes no refunding, so it causes no delay for listing.delay for listing.

CommissionCommission Goes only to the brokerGoes only to the broker Shared by both broker and Shared by both broker and banker. banker.

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Suggestions for Popularizing ASBASuggestions for Popularizing ASBA At present, there are two separate forms printed At present, there are two separate forms printed

with separate colour codes – one for ASBA and with separate colour codes – one for ASBA and another for non-ASBA applicant.another for non-ASBA applicant.Having two different forms may lead to a Having two different forms may lead to a situation where ASBA forms may not be available situation where ASBA forms may not be available in far-flung cities.in far-flung cities.As such, it would be better to have a common As such, it would be better to have a common form with a check-box for ASBA.form with a check-box for ASBA.

ASBA is available only with a few banks and that ASBA is available only with a few banks and that too with a selected branches.too with a selected branches.

ASBA continues to be poorly advertised, if it is ASBA continues to be poorly advertised, if it is promoted well, both investor and banker will promoted well, both investor and banker will realize that it is a win-win for all. realize that it is a win-win for all.

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Few Examples of Banks and Few Examples of Banks and Branches Offering ASBABranches Offering ASBA

BankBank No. of No. of BranchesBranches

Branches Branches offering the offering the

facilityfacility

ICICIICICI 25392539 101101

AXIS AXIS 12811281 160160

HDFCHDFC 20002000 102102

SBISBI 1003910039 10601060

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SEBI ReformsSEBI Reforms Recent reforms initiated by SEBI to boost retail Recent reforms initiated by SEBI to boost retail

participationparticipation 1. Retail investor limit has been hiked to Rs. 2 lakh from 1. Retail investor limit has been hiked to Rs. 2 lakh from

earlier limit of Rs. 1 lakh.earlier limit of Rs. 1 lakh.

2. Now, retail investor can apply through an e-IPO. Under this, 2. Now, retail investor can apply through an e-IPO. Under this, the applicant have to approach a broker with an the applicant have to approach a broker with an application either in electronic or physical format. Brokers, application either in electronic or physical format. Brokers, will then punch their application on the system. Brokers will then punch their application on the system. Brokers will be remunerated by issuer companies for this mode. will be remunerated by issuer companies for this mode.

3. To widen the shareholders base in public issues, SEBI plans 3. To widen the shareholders base in public issues, SEBI plans to ensure that every retail participants gets a minimum to ensure that every retail participants gets a minimum bid lot irrespective of application size.bid lot irrespective of application size.

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SEBI Reforms (Cont.)SEBI Reforms (Cont.)

4. To help the issuing companies to raise capital, the average free 4. To help the issuing companies to raise capital, the average free float market capitalization requirement for FPO and Right issue float market capitalization requirement for FPO and Right issue has been reduced to Rs. 3,000 Cr. from Rs. 5,000 Cr.has been reduced to Rs. 3,000 Cr. from Rs. 5,000 Cr.

5. The SEBI has allowed the use of Bonus and Right issues for 5. The SEBI has allowed the use of Bonus and Right issues for companies wishing to comply with minimum public shareholding companies wishing to comply with minimum public shareholding norms of 25% (the deadline for complying with this norm is June norms of 25% (the deadline for complying with this norm is June 2013).2013).

6. Non-Retail Investors have been barred from withdrawing or 6. Non-Retail Investors have been barred from withdrawing or lowering their bid size at any stage of public issues. However, lowering their bid size at any stage of public issues. However, they may increase their bid size. they may increase their bid size.

7. For IPO, issuers are now required to furnish the price band 5 7. For IPO, issuers are now required to furnish the price band 5 working days prior to issue opening as against the earlier 2 working days prior to issue opening as against the earlier 2 working days.working days.

2020