Market regulator SEBI (Securities and Exchange Board of India) today asked the banks, authorised to accept ASBA forms wherein bid amount for public offer shares remain in investors’ accounts till allotment, at all their branches by the end of 2012.

ASBA is a facility where funds remain in a retail investor’s bank account till shares are allotted to him in an initial public offer (IPO). At present, retail investors have two payment options for IPOs: first is by issuing a cheque with the IPO application form, and second, through the ASBA facility.

ASBA reduces the pressure on fund payment and clearing mechanism in the banking system as the money doesn't leave the retail investor’s account. The investor also benefits from interest earnings. In 2011, SEBI made ASBA compulsory for institutional investors and HNIs (high net worth individuals). Since its introduction in 2008, the ASBA facility has been used in over 90 public issues and 37 rights issues.

The facility is provided through Self Certified Syndicate Banks (SCSBs) and any bank desirous of offering ASBA facility need to register with SEBI. However, the facility is not available at all the branches of such banks. In a circular issued on 26th September, SEBI said that it has been felt that ASBA facility should be provided at all branches of SCSBs.

SEBI has decided to increase the number of branches designated for ASBA, in a phased manner. In the first phase, each SCSB should designate 50% of its total branches as 'Designated Branches' for ASBA by October 31, 2012. In the second phase, each SCSB should designate all of its branches as 'Designated Branches' for ASBA by December 31, 2012.

All the SCSBs have to submit a status report for each of the two phases within 15 days from the due date of the respective phases, SEBI said.