Monday, 4 April 2011

TIP to earn Rs. 11000 plus for one year to Retail Investors under ASBA procedure

TIP to earn Rs. 11000 plus for one year to Retail Investors (a) who apply for IPOs (b) frequently (c) with own funds (d) for maximum lots (e) under ASBA procedure (f) for Listing Gains.

(1) Invest Rs. 222222 in Bank FD for 3 years at 7.75 % p.a Earn Rs. 17729 Interest on FD for one year.

(2) Obtain Overdraft Limit Rs. 200000 (90% of FD) to apply for IPOs and Pay Rs. 10198 Interest on OD at 9.75 % p.a. (calculated on daily balances) for a period of six months in one year. It is assumed that OD facility could be availed for not more than one- half month on average

(3) When IPO Applications are submitted under ASBA procedure, Application money is only “blocked” but continues to remain in Savings Account; hence earn Rs. 3531 Interest at 3.50 %

This approach will result in a net benefit of Rs. 11062 (Rs 17729 Interest earned on FD minus Rs. 10198 Interest suffered on OD plus Rs. 3531 Interest earned on SB A/c)

The above rates of Interest and Margin are for ICICI Bank with which I am operating. Similar arrangements could perhaps be made with any Bank. For calculation purposes, effective rates of interest are adopted after considering frequency of interest payment or compounding with the help of


To put it simply, invest money in Bank FD and let it keep earning Interest. Only when there is need to apply for IPO, avail OD.  This obviates the need for idling funds in savings accounts throughout the year

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