SEBI details new IPO payment system for retail investors

22 May 2008

The Securities and Exchange Board of India (SEBI) has finalised the concept of an alternative mode of payment for public issues that will enable the application money to remain in the applicant's bank account until the basis of allocation is finalised.

The SEBI board had last week proposed to bring in an alternative mode of payment that is less taxing to the retail investor. (See: SEBI eases IPO payment norms for investors).

The new payment system, called Application Supported by Blocked Amount (ASBA), will require retail investors bidding at a cut-off price, to apply through self-certified syndicate banks (SCSBs) in which they have accounts.

Under this system, the application money will remain in the bank account of the applicant till such time the allotment is finalised, thus eliminating the refund process. SEBI has worked out the modalities of the ASBA process and has placed them on its website for public comments.

ASBA will require SCSBs to accept applications from investors, block the required funds for the bid payment and then upload the details in the electronic bidding system. Once the basis of allotment is finalised, the SCSB will release the required amount and release the unblocked amount.

If sufficient balance for blocking the amount is not available in the applicant's account, the application shall be rejected.
 
SEBI will receive comments on the ASBA process till 6 June 2008.