The application amount will be blocked in your Savings Account at the time of placing the bid for IPO. After the IPO allocation is complete, the required amount depending upon the allocation made to you is debited from your Bank Account and the rest, if any, is unblocked.

An Illustration: you bid for 100 shares for Rs.100 each. The total amount that will be blocked for this bid is Rs.10,000. If you are allotted only 40 shares @ Rs.98 each, then only Rs.3,920 (Rs.98*40) will be debited from your Account while the block will be removed from the balance amount of Rs.6,080 (10,000-3,920).