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

In an IPO, a demat applicant bids through the ASBA facility. Which statement correctly describes how the application money is handled?

Under ASBA the application money remains in the investor's own bank account but is blocked at bidding. After allotment, only the amount for shares actually allotted is debited and the balance is unblocked, so no refund is needed.

  1. AThe amount is debited from the bank account at the time of bidding and refunded later if no allotment
  2. BThe amount is blocked in the applicant's bank account and debited only to the extent of shares allottedCorrect
  3. CThe amount is blocked in the demat account until allotment
  4. DThe amount is paid to the DP, which forwards it to the issuer

Explanation

Under ASBA, the funds stay in the investor's bank account but are blocked; only the amount for allotted shares is debited on finalisation of allotment, and the rest is unblocked. So no refund process is needed. The demat account does not hold the funds.

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