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ASBA-like system will benefit retail investors

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SEBI | Retail investors | Business Standard Editorial Comment

Business Standard Editorial Comment 



Securities and Exchange Board of India Chairperson Madhabi Puri Buch’s announcement that the markets regulator is considering extending the concept of application supported by blocked amount, or ASBA, to the secondary market has interesting implications. It could smooth out trading for and enable individuals to earn interest while maintaining market exposure. But it could also result in a massive competitive advantage for banks, which do also offer securities broking services and hurt standalone brokerages and fintechs. ASBA as it stands has proved to be a boon for in the primary markets. It allows an investor to subscribe to an initial public offering (IPO) while placing a lien on the exact funding necessary. In case the investor receives full or partial allotment, the exact amount required is debited, and the requisite number of shares transferred. If allotment does not happen in the case of high oversubscription, or an incorrect application, the lien is removed. Either way, the money remains in the investor’s bank account and continues to generate interest, assuming it is an interest-bearing account.

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First Published: Sun, September 25 2022. 21:57 IST

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