What Is the Full Form of ASBA in Banking?

The Full Form of ‘ASBA’ in Banking is ‘Applications Supported Bank Accounts’.

Full Form of ASBA

ASBA stands for Applications Supported by Blocked Amount. It is a process used by banks, stockbrokers and other financial institutions in India to facilitate investments in new issues such as initial public offerings (IPOs) and follow-on public offers (FPOs).

When an investor applies for an issue, the application money is blocked in the investor’s bank account till the date of allotment. This blocking of funds ensures that the investor has enough money to pay for the shares if they are allotted to them. The process helps prevent investors from defaulting on their payments, which could result in significant losses for the issuer.

ASBA was introduced in 2008 by SEBI (Securities and Exchange Board of India) as part of its effort to improve efficiency and transparency in Indian capital markets. Since its introduction, ASBA has become the preferred mode of payment when applying for IPOs and FPOs. According to SEBI regulations, all investors must use ASBA when applying for new issues unless they opt out through written consent.

The main advantage of ASBA is that it provides convenience and security to both issuers and investors alike. For issuers, it eliminates the risk of default payments due to insufficient funds or non-availability of funds during critical times. For investors, it reduces paperwork as there is no need to provide physical cheques or demand drafts when applying for an issue. Furthermore, since the application money remains blocked until allotment, it eliminates any chances of misuse or misappropriation by either party involved in the transaction.

To apply using ASBA, investors must first fill out a form provided by their banks or financial institutions containing details about their bank accounts and other essential information such as PAN number etc.. Once this form is submitted along with a copy of cheque/demand draft/banker’s cheque, depending on what method you have chosen to make payment, then your bank will block the amount specified on your behalf at the time of submitting your application form. The amount will remain blocked until you receive an allotment or cancel your application prior to the finalization of results.

In conclusion, ASBA is an important innovation that has improved efficiency and transparency within India’s capital markets while providing convenience and security benefits to both issuers & investors alike. It has been instrumental in increasing participation from retail investors who can now apply for new issues without worrying about making timely payments due to insufficient funds or non-availability of funds at critical times.

---