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NISM Certifications · NISM-Series-VI: Depository Operations · Special Services - Public Offering / Corporate Actions

In a public issue made in dematerialised form, an applicant uses the ASBA facility. What happens to the application money?

Under ASBA the application money remains blocked in the investor's own bank account until allotment. Only the amount payable for the shares actually allotted is then debited, and the rest is unblocked, so no separate refund is required.

  1. AIt stays blocked in the applicant's own bank account until allotment, and only the amount for allotted shares is debitedCorrect
  2. BIt is transferred to the issuer's escrow account at the time of application
  3. CIt is paid to the depository participant to hold until allotment
  4. DIt is debited fully and refunded by cheque after allotment

Explanation

ASBA (Application Supported by Blocked Amount) blocks the funds in the investor's bank account at application. On finalisation of allotment, only the amount for the shares allotted is debited and the balance block is released. Hence no refund process is needed.

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