Market regulator Sebi today directed banks to clearly demarcate separate accounts for public offer applications, filed under ASBA (Application Supported by Blocked Amounts) facility -- under which money remains in the investors' accounts till the time of share allotment.
Sebi said in a circular that it has noticed some banks making applications on own account using ASBA facility, without having clearly demarcated funds and that some banks are marking lien against credit limits/overdraft facility of their account holders' for ASBA applications.
Consequently, the regulator has asked the banks to ensure that for applications made under ASBA facility, the application amount should be blocked only against and in a funded deposit account and ensure that clear demarcated funds are available for ASBA applications.
Sebi also said "such account shall be used solely for the purpose of making application in public issues and clear demarcated funds should be available in such account for ASBA application."
The new directions would come into force with immediate effect.
The regulator had introduced ASBA facility for public offers first in September 2008, when retail investors were allowed to invest through this facility. The move avoids the investors' money getting blocked between the time of bidding for shares and final allotment.
Under ASBA mechanism, investors can bid for shares while the money remains in his/her bank account and gets debited only after allotment of the shares.
The facility eliminates any delays related to refunds for the unallotted shares. Initially, the facility was offered to retail investors only and was given to other investors in 2009.