What is ASBA mode of payment for IPO?

Application Supported by Blocked Amount

 As the name suggests, when an investor applies for investment in primary market ( Initial Public Offer ) the amount gets blocked in bank account as lien amount and if shares are allotted the amount gets debited from bank account and if the shares are not allotted the blocked amount is released.
In old days, besides normal mode of cash or cheque payment along with IPO application, Stock Invest was introduced and was welcomed, but finally it was closed due to misuse of it by scrupulous operators and thus a boon in favor of retail investors has seen premature death.
In 2008, SEBI introduces ASBA mode i.e. an Application Supported by Blocked Amount for retail investors. ASBA system ensured that the applicant's money remains in his/her bank account till the shares are allotted. Now it has been extended to corporate investors and HNIs as well (from January 1, 2010, onwards).
The mechanism requires the applicant to give an authorization to block his/her application money in the bank account for subscribing to the IPO. His/her bank account is debited only after the basis of allotment is finalized, or the IPO is withdrawn or fails. In case of rights issue, the application money is debited after the receipt of instructions from the Registrars. Now Investors have to just mention their account details on the application form and submit it to the merchant bankers/brokers and their account will get debited on the basis of allotment, if any or else their money will remain in their banks.
In the process, ASBA was made mandatory for QIBs and HNIs for all IPOs and now from 01.01.2016 it is made mandatory across the segment i.e. QIBs, HNIs and Retail investors. Also IPOS listing time reduced from 12 working days to 6 working days.
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