It avoids the need for funds to be immediately debited

When investors traditionally apply for IPOs or Rights Issues, their funds are immediately debited from their bank accounts. This can lead to situations where the investor's funds are tied up for an extended period, even if they are not allotted any securities. Additionally, if there's oversubscription, wherein the demand for securities exceeds the available quantity, funds may need to be refunded, which can be cumbersome and time-consuming. ASBA addresses these issues by allowing investors to express their interest in subscribing to securities offerings without actually transferring the funds upfront. Instead of debiting the funds immediately, ASBA allows investors to block the necessary amount in their bank accounts, ensuring that the funds are reserved but not deducted. The main advantage of this approach is that investors' funds remain accessible for other purposes until the securities allocation is confirmed. If the investor is allotted securities, the bank only debits the account for the specific amount payable on the allocated securities. If no securities are allotted, the lien on the blocked funds is released, and the funds become available again.