(Cont.

from Page 2)

ASBA
WHAT IS THE MEANING OF ASBA?

ASBA means Application Supported by Blocked Amount. ASBA is an application containing an authorization to block the application money in the bank account, for subscribing to an issue. If an investor is applying through ASBA, his application money shall be debited from the bank account by Self Certified Syndicate Bank only if his application is selected for allotment after the basis of allotment is finalized. This new mechanism works well for IPOs and Rights Issues.
WHO HAS INTRODUCED ASBA?

Securities Exchange Board of India (SEBI) the Capital market regulator SEBI in 2008 has introduced a new mechanism for subscribing to initial public offers (IPO) for retail investors. Called ASBA, this facility is now offered to HNIs and Corporate investors also from January 1, 2010 onwards.
WHO ARE SELF CERTIFIED SYNDICATE BANK?

Self Certified Syndicate Bank (SCSB) is a bank, which offers to its customers the facility of applying to IPO through the ASBA process. An SCSB enters into an agreement with the issuer to offer the ASBA facility to all its account holders for all issues to which ASBA process is applicable.
WHO ARE THE ELIGIBLE INVESTORS UNDER ASBA?

From January 1, 2010 all the investors other than Qualified Institutional Buyers (QIBs) can apply through ASBA in all types of public issues.
HOW DOES ASBA PROCESS WORK?

Self-Certified Syndicate Banks (SCSB) are currently offering this facility to the Investors. The investor can visit SEBI website or BSE or NSE website to get the list of banks and their branches that are offering ASBA facility. An ASBA investor has to submit the filled-in ASBA application form physically to the SCSB with whom he maintains the Bank account. The SCSB shall then block the application money in the bank account as specified in the ASBA, on the basis of the authorization. The application money shall remain blocked, till finalization of the basis of allotment in the issue or till withdrawal/failure of the issue or till withdrawal/rejection of the application, as the case may be. The application data shall thereafter be uploaded by the SCSB in the electronic bidding system through a web enabled interface provided by the Stock Exchange (either NSE/BSE). Once the basis of allotment is finalized, the Registrar to the Issue shall send an appropriate request to the relevant bank for transferring the requisite amount to the issuer's account. In case of withdrawal/failure of the issue, the amount shall be unblocked by the SCSB on the receipt of information from the pre-issue merchant bankers.
WILL BANK CHARGE ANY ADDITIONAL FEES FROM ITS CUSTOMERS IF THEY CHOOSE ASBA IPO PAYMENT?

No additional fee is charged.

WHEN THE BANKS WILL NEED MONEY IN CUSTOMERS ACCOUNT TO BLOCK FOR ASBA PAYMENT OPTION?

Bank will need the money in investor's account at the time of placing the bid for IPO shares through ASBA payment option. SEBI has clearly instructed that banks will not accept IPO application before blocking the bidding amount (for ASBA process). The amount will remain blocked until Registrar / Stock Exchange requests bank to release the fund either because the investor didn't receive the allotment, the IPO application got rejected or investor has withdrawn the IPO application
CAN AN INVESTOR APPLY ON LOWER PRICE BAND USING ASBA PAYMENT METHOD?

No, in the current form of ASBA, retail individual investors can only apply at cut-off price to use ASBA payment option.
WHAT IS THE BENEFIT OF SUBSCRIBING FROM ASBA?

There are many benefits of applying for IPO in ASBA method. The first and most important is that investors money is not debited from his account and as such he is not losing on the interest earned during that period. Secondly there is a transparency in share allotment process. Only that amount is debited from account for which shares have been allotted after the basis of allotment is completed. So there is no waiting for refund of money and no such tensions.