In order to encourage more banks to provide investors the facility to apply for a public issue without making payment, capital market regulator Securities and Exchange Board of India (Sebi) said such application will fetch as much commission as normal ones.
This facility, Application Supported by Blocked Amount (ASBA), was introduced in 2008. With this facility, the amount required for the number shares applied for will be blocked in the investor?s personal account. Upon allocation of shares, a proportionate amount is debited from the account. This helps do away with refund of balance amount in normal application process where investors have to wait for a few more days after the allotment of shares is completed since the deposit amount is lying in an escrow account.
The scheme, however, failed to take off due to lack of adequate incentives for self-certified syndicate banks which were assigned to the task of accepting ASBAs, uploading details in the bidding system and blocking or unblocking of the account. Currently there are around 20 banks providing ASBA facility that includes Axis Bank, HDFC Bank, ICICI Bank, HSBC, IDBI Bank, Kotak Mahindra Bank, PNB, SBI, and Bank of Baroda, among others.
The regulator, after consulting merchant bankers, noted that while commission is being paid for non-ASBA applications, no commission was paid to ASBA applications.
?The payment of commission in the issue process should be based on the principle of fairness which demands a level-playing field for both ASBA and non-ASBA applications,? the Sebi circular noted. For the purpose of payment of commission, the regulator in its circular stated that both types of applications–whether uploaded by syndicate members for non-ASBA or by self-certified syndicate banks for ASBA–shall be treated equally and the commission must be paid accordingly.