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Applying for an IPO through UPI is genuinely simple once you understand the two-step process, the application and then the mandate approval. Most people who have trouble have missed that second step, and their application gets rejected silently.
The ASBA Mechanism, What’s Actually Happening
ASBA stands for Application Supported by Blocked Amount. When you apply for an IPO, your money is not transferred anywhere. It is blocked in your bank account, a lien is placed on that amount. The money physically stays in your account and continues to earn interest if it is in a savings account. Only if you get allotment is the money actually debited. If you don’t get shares, the block is released, usually within two to three working days after allotment.
The UPI-based ASBA process was introduced to make this accessible to everyone without needing a bank branch visit. Before this, you had to physically submit ASBA forms at your bank. Now the whole thing happens on your phone.
The ₹5 Lakh Retail Limit
The UPI mechanism for IPOs is available for retail investors, those applying for up to ₹2 lakh worth of shares (which is the retail category limit). For the UPI payment infrastructure, the applicable limit per IPO application is ₹5 lakh. Since the retail investor category caps at ₹2 lakh in application value, most retail investors are well within this.
If you are applying as an HNI (above ₹2 lakh), you cannot use the UPI route. You need to use the net banking ASBA facility provided by your bank directly.
Step-by-Step: How to Apply
The process is largely the same whether you use your broker, Groww, Upstox, or any other broker that supports IPO applications. Here is how it works.
Open your broker’s app and go to the IPO section. You will see a list of currently open IPOs. Select the one you want to apply for.
You will see the price band, for example, ₹400 to ₹420. You need to enter the number of lots you want to apply for and the price. For retail investors, I strongly recommend selecting the cut-off price option. This means you are willing to pay whatever the final issue price is within the band. If you enter a specific price and the final price is higher, your application is rejected. Cut-off protects against this.
Enter your UPI ID. This is the handle linked to your bank account, something like yourname@okicici or yourname@ybl. Make sure this UPI ID is linked to a bank account with sufficient balance to cover the blocked amount.
Submit the application. At this point, the application is placed but it is not complete yet.
The Critical Second Step: Approving the UPI Mandate
After you submit the application, the system sends a mandate request to your UPI app, typically PhonePe, Google Pay, Paytm, or your bank’s own UPI app. You need to open that app and approve the mandate. This is the step that blocks the required amount in your account.
You will typically get a notification. Go into the UPI app, find the pending mandate request, and approve it using your UPI PIN. Once approved, the amount is blocked and your application is fully submitted.
If you do not approve the mandate before the IPO closes, your application is rejected. The IPO does not wait for you. This is probably the single most common reason retail applications fail, the investor applied but forgot or did not know to approve the mandate.
You typically have up to five working days from the application date to approve the mandate, but do it immediately. The IPO window is usually three days and you do not want to risk forgetting.
Common Failure Points
Wrong UPI handle is a frequent issue. Double-check the UPI ID you enter. If you type it incorrectly, the mandate request will go to the wrong address or nowhere, and your application will fail. Some brokers validate the UPI ID format but not whether it actually exists or is linked to you.
Insufficient balance is another common failure. The block requires the full application amount to be available at the time of mandate approval. If you have ₹14,000 in the account and the application is for ₹14,500, the mandate will fail. Keep a buffer.
UPI handle linked to the wrong bank is something people miss. Your UPI ID might be your primary phone number, but it could be linked to an old bank account you no longer actively use. Make sure the UPI ID you use for IPO applications is linked to an account with sufficient funds.
Applying close to the IPO closing time is risky. If you apply in the last few hours and then cannot approve the mandate in time, your application fails. Apply early, approve the mandate immediately.
What Happens After You Submit
Once the mandate is approved, you will see a confirmation in your broker app that the application is submitted. The IPO closes, the registrar processes all applications, and allotment happens. This typically takes about six days from the IPO close date.
If you get allotment, the blocked amount is debited and shares are credited to your demat account, usually one day before listing. If you do not get allotment, the block is released and the full amount is available in your account again within two to three working days after allotment.
You can check your allotment status on the registrar’s website using your PAN number or application number. I have written a separate guide on how to check IPO allotment status across all major registrars.
A Note on Cut-Off Price
Retail investors should almost always use the cut-off price option. This ensures your application is valid regardless of where within the price band the final price is set. The only reason not to use cut-off is if you have a specific view that the IPO is only worth applying for below a certain price, but this is a rare and advanced decision for most retail investors.
When you select cut-off, the amount blocked is based on the upper end of the price band. If the final price is set below the upper end, the difference is released back to you after allotment finalization.
Understanding how allotment works also helps you set expectations, applying correctly through UPI is necessary but not sufficient to guarantee shares in an oversubscribed IPO.
Practical takeaway: Submit your IPO application early, use cut-off price, and approve the UPI mandate immediately, do not wait. These three habits will prevent almost every common application failure.
This post is for educational purposes only. It is not financial advice. Mohit Mehra is not a SEBI registered investment advisor. Please consult a qualified financial advisor before making investment decisions.