IPO subscriptions: Process only money-backed ASBA applications, says Sebi

Latest directive follows instances during LIC's IPO where certain applications had to be cancelled as they didn't have sufficient funds in bank accounts

The Securities and Exchange Board of India (Sebi) on Monday said IPO applications should only be processed if there is supporting funds in an investor’s bank account.

“Stock exchanges shall accept the ASBA applications in their electronic book building platform only with a mandatory confirmation on the application monies blocked,” Sebi said in a circular.

ASBA, which stands for application supported by blocked amount, is a facility whereby money leaves an investors bank account only after shares are allotted. Under an earlier system, money used to get deducted at the time of applications and used to get refunded in case