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What is ASBA in an IPO?
By InvestorTrack team · Last reviewed · 5 min read
ASBA stands for Application Supported by Blocked Amount. It is the way every IPO bid is paid for in India: instead of handing over money when you apply, you let your bank block the amount in your own account. The money leaves your account only if you are allotted shares.
The idea behind ASBA
Before ASBA, an applicant sent a cheque or paid cash with the application, and got a refund weeks later if shares were not allotted. With ASBA, the bank only marks the amount as unavailable in your account. You cannot spend it while it is blocked, but it stays yours, and it is not paid to the company or to anyone else until allotment.
This is why applying for an IPO is not a payment and why a bid that gets no shares costs you nothing except the time the money was tied up.
Two ways to apply with ASBA
Either way the amount is blocked, not debited. See UPI mandate explained for the UPI route and how to apply step by step for the whole process.
How much is blocked
The amount blocked is the number of shares in your bid times the price you bid at. If you bid at the cut-off price, the amount is worked out at the top of the price band, so there is enough to cover the final price whatever it turns out to be. If the final price is lower than the top of the band, the extra is released after allotment.
Use the application amount calculator to see the amount for a number of lots at a given price.
After allotment
- Allotted in full: the bank debits the full amount for the shares and the shares are credited to your demat account.
- Allotted in part: the amount for the allotted shares is debited and the rest is unblocked.
- Not allotted: the whole block is removed on the refund date.
The refund date is usually two working days after the issue closes. It is shown on each IPO's Allotment tab. Whether the blocked money earns interest in the meantime depends on your bank's terms for the account, so check with your bank if it matters to you.
Points to be careful about
- Keep enough balance for the whole bid. If the balance is short when the bank tries to block, the bid is rejected.
- Use an account in your own name. A third party's account is not accepted.
- One bid per PAN. Several applications from the same PAN for the same IPO can be treated as multiple applications and rejected.
- Read the confirmation. The amount shown when you approve the block should match the bid you placed.
Frequently asked questions
What does ASBA stand for?
Application Supported by Blocked Amount. Your bank blocks the bid amount in your own account instead of you paying it up front.
Is ASBA the same as UPI for IPOs?
Not exactly. UPI is one way to give the blocking instruction, used through a broker app for bids up to ₹5 lakh. Net banking ASBA is the other way, used through your bank. In both, the money is blocked, not debited.
Can my blocked IPO money earn interest?
The money stays in your account while it is blocked, so whether it earns interest depends on your bank's terms for that account. Check with your bank.
Does the company get my money when it is blocked?
No. The company receives money only for the shares that are allotted, after allotment. Until then the money is yours, in your account.
Can I use ASBA for a bid above ₹5 lakh?
Yes, through your bank's net banking. UPI through a broker app is limited to ₹5 lakh for an individual's bid.