What is the purpose of ASBA in the IPO and Rights Issue subscription process?

To ensure availability of funds without immediate debit

ASBA (Application Supported by Blocked Amount) is a process designed to ensure the availability of funds for subscribing to Initial Public Offers (IPOs) and Rights Issues without immediately debiting the investor's account. The primary purpose of ASBA is to allow investors to express their interest in subscribing to securities offerings while keeping the funds blocked in their accounts. This approach helps in preventing the funds from being used for other purposes until the securities allocation is confirmed. ASBA works by authorizing the bank to block the necessary amount in the investor's account, which is equivalent to the application money for the securities being applied for. This ensures that the investor has the required funds readily available for allotment if they are granted securities. If the investor is allotted securities, the bank debits the account only for the amount payable on the allocated securities, and the lien on the remaining balance is released. On the other hand, if the investor is not allotted any securities, the bank removes the lien and the funds are made accessible to the investor again.