It was dubbed the electronic stock investment scheme or Application Supported by Blocked Amount (ASBA) process and touted as the solution to avoid retail investors’ funds being blocked for several weeks in IPO (initial public offering) investments. That ASBA was stillborn only exposes SEBI’s tendency to announce new regulation without the rigour of drawing up a rollout plan that also provides for re-examination and course-correction, if required. Under ASBA, the IPO application money would remain blocked in the investor’s bank account until allotment and would only be transferred to the company thereafter; it would simply be unblocked if there was no allotment.
However, while banks earned a commission for direct applications, there was none on ASBA; consequently, banks that agreed to participate in the process had no incentive to encourage depositors to use it. In fact, they were expected to upload investment details, block funds and unblock them for free and nobody wants to do that. It is only on 5 August 2009 that SEBI acknowledged the need for incentives and clarified that commissions can be paid on ASBA as well as non-ASBA applications. This alone will not be enough. When ASBA was launched, the publicity generated by SEBI’s move attracted attention; there will have to be a similar effort to revive the instrument.
The same goes for no-load mutual funds, a good, investor-friendly idea which has been pushed on the market without a rollout plan or discussion. So retail investors, who are clueless about how to choose a fund, will either be pushed to unit-linked insurance plans or simply opt out and seek other investment avenues. The sudden interest in corporate fixed deposits and non-convertible debentures shows that this is already happening. Some companies raising money are not even safe. So, once again, instead of recognising that money will quickly flow to other investment avenues, SEBI told Moneylife that it would prefer to ‘monitor the progress’. While it does that, retail investment would have moved to other instruments and yet another investor-friendly move would have fallen flat on its face.