The Securities and Exchange Board of India (SEBI) has introduced Application Supported by Blocked Amount (ASBA); a supplementary process for applying IPOs. Previously, when investors apply for an IPO, they have to pay the entire money upfront to the registrar/banker and hence stand to lose returns on the money that is locked until the IPO is allocated. The new move will protect the money of investors and will also make the IPO issue process more efficient and less time consuming.
In the new process, banks will block the money in investors’ account when they bid for an IPO and the money is released on the basis of number of shares being allotted. The remaining money will be unlocked by the banks. As a result, the IPO process is expected to be completed within 15 days of the closing date of the issue.
- Money no longer gets locked in IPOs