It is a facility provided by banks to investors in initial public offerings, follow-on public offers and new fund offers of mutual funds.
If you apply for an IPO/NFO via Asba, your application amount gets blocked in your bank account. While the amount stays in your account, it cannot be used until the share/MF unit allotment is done.
The money is debited from the bank account only if your application is selected for allotment after the basis of allotment is finalised, or the issue is withdrawn or fails.
The amount debited depends on the shares/MF units allotted to you. And, the remaining amount, if any, is freed for use.
The option, though available, is not mandatory for retail investors. They can continue to make applications through the existing facility of applying with cheque.
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, 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.