WHILE IT IS NECESSARY FOR YOU TO HOLD AN ACCOUNT WITH THE BANK TO OPT FOR THIS FACILITY, it is not necessary for you to hold the demat account with the same bank. You can avail the option either online via net-banking or by submitting it to the bank

What is the procedure?

Under the Asba facility, investors can apply in any public/rights issue by using their bank account. Investors must submit the Asba form (its colour is different from the normal application form and is available at the designated branches of the banks approved for providing the facility) after filling details such as name of the applicant, permanent account number (PAN) number, demat account number, bid quantity, bid price and other relevant details, to their banking branch with an instruction to block the amount in their account. In turn, the bank uploads the details of the application in the bidding platform. Investors must ensure that the details that are filled in the Asba form are correct, otherwise the form is liable to be rejected. While it is necessary for you to hold an account with the bank to opt for this facility, it is not necessary for you to hold the demat account with the same bank. You can avail the option either online through net-banking or by submitting it to the bank.

Why use the facility?

Prior to Asba, while applying in an IPO, the entire amount had to be paid upfront, even before an allotment by retail investors. In case there was no allotment or part-allotment, the amount would get refunded to the applicant after 20-30 days. This was alost opportunity as the funds did not earn any interest during the period either. However, if the application is made via Asba, the funds stay blocked in your account, but continue to earn the interest. It is especially important after the shift to interest calculation on the daily balance.