In simple termer, ASBA facility allows the application money to remain blocked in the applicant’s bank account till the time the shares are actually allotted in the public offers.
As the participants have gained confidence, the scope of ASBA has steadily been increased.
The primary benefits of ASBA are:
01) The TAT time for refund of application money, in case on partial/non-refund of the securities applied is ZERO.
02)The investor continues to earn interest on the blocked amount in his/her Savings Bank Account.
03)The SCSB continues to earn the CASA float on the blocked amounts.
04)Savings to the economy as cheques/demand drafts need not travel in the Clearing cycle.
05)A perfect ePayment option.
It was observed though ASBA was prevalent for a long time; majority of the Investors continued to invest through cheques/demand drafts even when their Banks were part of the SCSB panel.
It was noticed, that in ASBA the broker role was eliminated, with no commission not being received by them. Hence, they were not encouraging ASBA, and preferred the old fashioned cheques/demand drafts.
To motivate Brokers to be part of the ASBA success, SEBI vide its circular dt04/10/2012, introduced the mechanism of lodging ASBA applications through the Brokers.
The Circular envisages enabling the ASBA facility to submit the application forms in more than 1,000 locations which are part of the nationwide broker network of the Stock Exchanges, by March 1, 2013. In the initial phase, 400 locations were activated by Jan 01, 2013.
In case of ASBA application the brokers to forward a schedule along with application form to respective ASBA Branch. As per the brief process flow,
01) Broker shall forward a schedule (containing application number and amount) along with application forms to the branch named for ASBA of the respective self certified syndicate banks (SCSBs) for blocking of fund, within T+2 days of the issue closure.
02) The SCS Bank will download the details pertaining to their banks from the respective stock exchange and block the funds in the respective accounts. In case of any discrepancy, the appropriate return reason to be chosen.
03) The reverse file is uploaded back to the stock exchange website.
04) The commission is received by the broker basing on his registration number.
The main advantages of the above are:
a) Broker is encouraged to be part of the ASBA platform, as he is sure of the commission.
b) Investors are encouraged to be part of the Capital Market, though expert advice by their brokers.
SEBI had also introduced an additional mechanism for investors to submit application forms in public issues using the stock broker network of stock exchanges, who may not be syndicate members in an issue.
- SEBI issues guidelines for separate debt segment on bourses (thehindu.com)
- Sebi extends pre-open call auction to all scrips (rediff.com)