SEBI has mandated that henceforth all HNI applications in IPO’s would have to be through ASBA. This would bring about a change in how applications happen in IPO’s currently and how they would happen in future.

HNI applications are leveraged applications to a great extent and because they involve interest payment, they have typically been coming on the last day when the issue closes. With the change happening it would now not be possible to see the huige subscription that happens in this category on the last day. The reason for this is that ASBA applications need longer time to process and there has to be a clear balance in the account prior to submitting the application. Until and unless the balance exists, the bank would not be able to block the account with the application account.

Till now typically an issue which closed on Friday, the cheques of the same would be cleared only on Tuesdaay. Henceforth if the issue was to close on Friday, you would need a clear balance on Friday itself. This would increase the number of days for which money would be borrowed in any issue.

The rate of interest is likely to come down because there is interest which is being earned as the money does not leave the bank or the bank account of the applicant. It would take a couple of issues for systems to fall in place and new rates of interest to stabilise. However one thing is for sure, the retial investor would get a much better idea of the response of HNI’s well before the issue closes and he could take a much more informed decision on his application.