InvestorQ : What is ASBA in secondary markets and how will it work?
Mahima Roy made post

What is ASBA in secondary markets and how will it work?

Crowny Pinto answered.
3 months ago

At a recent speech at the Fintech Summit 2022, Madhabi Puri Buch, underlined that SEBI planned to introduce ASBA facility for secondary market deals too. Applications Supported by Blocked Amounts (ASBA) is very common in IPO applications. Here is how it works. When an IPO application is made, then the amount equivalent to the IPO application amount is blocked in the bank. However, appropriate debit is only done on the allotment date. For shares not allotted, the lien is immediately released so customer can use it from next day.

Now, SEBI wants to introduce this system of ASBA in secondary markets. This system may not make a difference to bank-backed brokers like ICICI Direct, HDFC Securities, Kotak Securities etc. In these cases, the amount anyways stays in the linked bank account till the actual pay-out. The problem arises in non-bank brokers where the account has to be funded in advance. It is here that brokers get the float of early funding of trading account as well as of amounts not utilized. Now, SEBI wants to restrict that by introducing ASBA. When you buy shares, bank account gets debited only on the settlement day, not before that.