ASBA and UPI: how your IPO money is held

ASBA lets an applicant block funds in their own bank account until IPO allotment is decided. The money does not leave the account. It stays there, blocked but not paid. The company cannot touch it. The registrar cannot touch it. Only when the allotment is decided, days later, does anything move: if shares are allotted, the bank debits the amount; if not, the block disappears. The applicant never wrote a cheque. No transfer was made. Only a block was authorised.

This is ASBA: Application Supported by Blocked Amount. The term comes straight from the SEBI regulations — “an application for subscribing to a public issue or rights issue, along with an authorisation to self-certified syndicate bank to block the application money in a bank account.” ¹ The key word is block. Not pay. Not transfer. Block.

Before ASBA, an investor applying for an IPO wrote a cheque or transferred funds to the issue’s collection account. The money sat with the registrar or the banker to the issue for days, earning nothing, exposed to the risk of a default or a delay in refunds. If the issue was oversubscribed and the applicant did not get shares, the money came back — but only after the allotment process, which could take a week or more. ASBA ended that. The applicant’s money never leaves their control until there is a share to show for it.

ASBA is now mandatory for everyone

SEBI made ASBA compulsory for all categories of investors in both public issues and rights issues. The Master Circular states it plainly: “All the investors / shareholders making application in public issue / rights issue shall use ASBA facility for making payment.” ¹ Retail investors, qualified institutional buyers, non-institutional investors — every category. There is no opt-out.

The old system, where the investor handed over a cheque and hoped the refund came on time, is gone. Every application today works through the block mechanism: the investor authorises the bank to block the application money, and the bank does not release it unless allotment happens.

UPI: blocking funds with a single tap

Retail individual investors — the category that covers most first-time applicants — have an even simpler way to use ASBA: through UPI, the Unified Payments Interface that most Indians already use for daily payments.

Here is how it works. The applicant applies through an intermediary — a syndicate member, a registered stock broker, a registrar, or a depository participant — and enters their UPI ID. A collect request lands on their phone. They approve it. The amount is blocked in their bank account. No cheque, no net-banking login, no form. ¹

SEBI introduced UPI as a payment mechanism for ASBA specifically to “increase efficiency, eliminate the need for manual intervention at various stages.” ¹ The regulation is precise: “UPI would allow facility to block the funds at the time of application.” ¹ The mandate approved on the phone is not a payment instruction. It is an authorisation to block. The money remains in the account — it still earns whatever interest the account pays — and simply cannot be spent until the block is either converted to a debit (shares allotted) or released (not allotted).

Who are the invisible parties?

Three entities work behind the screen. None is visible to the applicant, but each has a defined role.

SCSB — Self-Certified Syndicate Bank. The bank where the applicant holds their account. It blocks the amount when the applicant applies, and later debits it on allotment. Every bank that offers ASBA is registered with SEBI as an SCSB. ¹

Sponsor Bank. A different bank — a banker to the issue, registered with SEBI, appointed by the company launching the IPO. It acts as a conduit between the stock exchanges and NPCI, pushing the mandate collect requests into the UPI system. ¹

NPCI — National Payments Corporation of India. The umbrella organisation that runs UPI. It routes the mandate request from the sponsor bank to the investor’s SCSB, and settles the instruction when allotment happens. NPCI is a Reserve Bank of India initiative, the backbone of India’s retail payment system. ¹

The flow: the applicant approves the mandate on their phone; the sponsor bank sends a collect request via NPCI; NPCI routes it to the applicant’s SCSB; the SCSB blocks the funds. The money never moves. It stays where it is, under a block.

Your account, your PAN, your UPI ID

There is a hard rule that catches many first-time applicants: you must use only your own bank account and only your own UPI ID. The Master Circular is explicit — an investor “shall use only his/her own bank account or only his/her own bank account linked UPI ID to make an application. Applications made using a third party bank account or using a third party linked bank account UPI ID are liable for rejection.” ¹

Apply using a parent’s bank account, or a spouse’s UPI ID, and the application is rejected — even if the PAN is correct, even if the money is there.

The PAN must match too. Before blocking the money, the SCSB must ensure that “the PAN mentioned in the application matches with the PAN linked to the bank account of the applicant.” ¹ The registrar then runs a third-party verification, matching the PAN in the demat account against the PAN in the bank account. A mismatch makes the application invalid for allotment. ¹

What happens after allotment

Two outcomes, both automatic.

If shares are allotted, the SCSB debits the blocked amount. The money moves from the applicant’s account to the issue account, the deduction shows up in the bank statement, and the shares appear in the demat account. The block has done its job — it held the money aside until there was a share to buy.

If no shares are allotted, the block is released. The money was never actually paid; it stayed in the account the whole time. No deduction appears, only the quiet disappearance of the hold.

SEBI sets deadlines for this, and pays compensation if a bank misses them — the subject of the listing-timeline piece. What matters here is the principle: the applicant’s money is never at risk. It is blocked, not debited, and it stays in the applicant’s own account until there is a share to show for it. ¹

Footnotes

1. SEBI Master Circular for Issue of Capital and Disclosure Requirements, 11 November 2024, Chapters 9 (ASBA) and 10 (UPI in public issues). sebi.gov.in. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷ ↩⁸ ↩⁹ ↩¹⁰ ↩¹¹ ↩¹²