What happens to the blocked amount in ASBA, if the investor is allotted securities?

The bank debits the account for the amount payable on allotted securities and removes the lien

The correct answer is option 3- The bank debits the account for the amount payable on allotted securities and removes the lien.

If the investor is allotted securities, the bank debits the account only for the amount required to pay for those securities. The lien on the reserved funds is removed, and the remaining balance is available for the investor's use. This process ensures that the investor's account is accurately debited based on the actual securities allocation and payment required while releasing any unnecessary hold on the funds.

Initial Public Offers and Rights Issues etc. of securities (Shares, Debentures or Other Financial Instruments) may be subscribed by paying Application Money by a banking instrument (Cheque, Pay order / Draft, Debit to Bank Account or through Applications Supported Blocked Amount (ASBA). ASBA is one of the methods for payment of Application Money. ASBA is a process developed by Securities and Exchange Board of India (SEBI)to apply for subscribing to IPOs and Rights Issue etc. of securities. Under the method, the applicant authorises the bank to block the bank account for the application money, for subscribing the issue. The Bank debits the applicant’s account with application money only if he / she is allotted securities (Shares / Debentures etc.) for the amount payable on allotted securities. In case, securities are not allotted, the bank removes the block (lien) on the amount. Under ASBA based applications, Application Amount payable on the securities applied is blocked by the bank i.e., it marks a lien on amount payable as Application Money on Securities applied. After the company has allotted securities, bank debits the applicant’s bank account by the amount payable on allotted securities and remove the lien on the balance amount.