Investors often wonder which method is best for applying for mutual funds. Should they use an Application Supported by a Blocked Amount or stick to traditional methods? Understanding both can help make an informed decision.
Fund Handling
Application Supported by Blocked Amount Method:
In the ASBA method, funds are blocked in the investor’s bank account rather than being debited immediately. This means the amount continues to earn interest until the allotment is confirmed. The funds are debited only if the application is successful, making it a secure and efficient option.
Traditional Method:
In contrast, the traditional method involves depositing funds from the investor’s bank account upon application. This results in no interest being earned on the debited amount. If the application is unsuccessful, the funds are processed for a refund, which can take additional time.
Processing Speed
Application Supported by Blocked Amount Method:
Application Supported by Blocked Amount offers faster processing due to the upfront blocking of funds. Since the amount is blocked and not debited, there is no need to process a refund if the application is unsuccessful. This feature leads to a more streamlined and quicker application process.
Traditional Method:
The traditional method can be slower due to the need for manual intervention and refund processing. If the application is unsuccessful, the refund process can add delays. This method generally takes more time than the application supported by a blocked amount.
Investor Convenience
Application Supported by Blocked Amount Method:
For investors registered with an SCSB bank, Application Supported by Blocked Amount is a simple and convenient option. The process involves less paperwork and quicker transactions. It is particularly beneficial for frequent investors who value speed and efficiency.
Traditional Method:
The traditional method remains familiar to many investors, making it a comfortable choice. It is accessible to all investors, regardless of the bank they use. There is no need for specific SCSB bank accounts, simplifying the process for some.
Eligibility and Accessibility
Application Supported by Blocked Amount Method:
To use the Blocked Amount Application, an investor must have an active PAN and demat account. Additionally, the bank must be an SCSB as per SEBI regulations. A sufficient balance in the account is also necessary to ensure the funds can be blocked.
Traditional Method:
Traditional methods are available to all investors without specific requirements. Any bank account can be used for transactions, providing broader accessibility. This feature makes it a viable option for those without access to an SCSB bank.
Interest Earnings
Application Supported by Blocked Amount Method:
One key benefit of ASBA is that investors still earn interest on blocked funds. This financial benefit applies even if the application is unsuccessful and helps maintain liquidity in the investor’s account.
Traditional Method:
With the traditional method, no interest is earned on debited funds during application, resulting in a reduced financial benefit. Additionally, it does not effectively support maintaining liquidity as an Application Supported by a Blocked Amount.
Process Familiarity
Application Supported by Blocked Amount Method:
Application Supported by Blocked Amount may be newer to some investors. It requires familiarisation with the process and registration with an SCSB bank. This feature can involve a learning curve, especially for those new to the method.
Traditional Method:
The traditional application method is long-established and familiar to most investors. There is no need for additional learning or registration. This feature makes it a straightforward choice for many, especially those accustomed to the traditional process.
Choosing between ASBA and traditional methods depends on your preferences and circumstances. Blocked Amount Application offers interest earnings and faster processing, making it a convenient option for many. However, conventional methods remain accessible and familiar to many investors. Assess your requirements and select the method that aligns best with your investment strategy.
