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

In a public issue of shares, an investor applies through the ASBA facility using a demat account. Which statement about the process is correct?

With ASBA, the investor's bank blocks the application amount in the savings account until allotment is finalised. Only the amount for shares actually allotted is debited, and the rest is unblocked. Money is not paid to the issuer upfront, and the depository does not hold the funds.

  1. AThe application money is debited from the investor's bank account immediately and refunded later if allotment fails
  2. BThe application amount remains blocked in the investor's bank account until allotment is finalised, and is debited only for the shares allottedCorrect
  3. CThe depository blocks the funds in the demat account
  4. DThe funds are transferred to the issuer's escrow account at the time of application

Explanation

Under ASBA (Application Supported by Blocked Amount), the bank blocks the application amount in the investor's account. Only the amount for allotted shares is debited after finalisation of the basis of allotment, and the balance is unblocked. Funds are never moved to the issuer at application, and the depository does not block money.

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