What is BSDA (Basic Service Demat Account)? | My Espresso

BSDA Account:A Guide on Basic Service Demat Account

If you wish to buy or sell equities, a demat account is an essential requirement. You can use a demat account to hold not only equities but also other financial assets such as bonds, gold bonds, mutual funds, etc. As an investor, when you open a demat account online with a depository participant (DP), it is recommended that you also have your trading account with the same DP for seamless debits and credits.


Published on 20 February 2023

In 2012 the Securities and Exchange Board of India (SEBI) recognised that there is a segment of investors who are interested in investing in the capital market; however, they possess a relatively smaller investment capacity. For this group, the SEBI launched the Basic Service Demat Account (BSDA).

Without further ado, let us understand what a Basic Service Demat Account is and what falls under its purview.

What is a BSDA Account?

A BSDA account was introduced by SEBI in 2012 as a special type of Demat account for Indian investors. This type of account was primarily introduced to attract small investors with inadequate or no knowledge about stocks, ETFs, mutual funds, and more.

A basic service demat account has features and advantages similar to a regular Demat account. The difference comes in terms of maintenance charges.

A BSDA account holder won’t have to pay maintenance charges as long their holding in the account is below Rs 50,000. When the holding is between Rs 50,000 and Rs 2 lakh, investors will have to pay an annual maintenance fee of only Rs 100.

How to Open a Basic Service Demat Account

Usually, all depository participants in India have a tendency to convert every demat account into a basic service demat account as long as they meet the requirements. Depository participants usually compound the annual maintenance fee according to each quarter. On the billing date, the depository participant will evaluate whether the holding amount has reached beyond Rs 2 lakh or not in a specific quarter.

When your holding hasn’t gone beyond the Rs 2 lakh margin, it will remain a BSDA account. But when you have more than one demat account, you won’t be able to enjoy the benefits of a BSDA account.

While creating a demat account, you will find an option to select the BSDA benefits. Tick that option to enjoy the low maintenance charges of a BSDA account.

If you want to create a demat account online without much hassle, Myespresso can help you out. Visit our website and open your demat account today through a convenient process. Once you create your demat account, you will be able to enter the world of trading.

Explaining the Basic Service Demat Account

To encourage participation of the retail investors in IPO and the equity markets, SEBI launched the Basic Service Demat Account (BSDA). To make investments effective, the BSDA aims to provide the demat account basic services at a low cost. The BSDA account allows access to the stock market for potential investors with a financial portfolio of ₹2 lakhs or under.

A key difference between a traditional demat account and a BSDA account is that with the former, one can open multiple accounts with various Depository Participants (DPs), whereas with the latter, you are only allowed a single account across DPs. This was because the SEBI recognised that several individuals open a demat account online only to leave it dormant and unused.

Despite not using their demat account for trading and investments, these individuals still pay the high maintenance fees. To help these individuals, the SEBI introduced the demat account basic services in India. If their value holdings are below ₹50,000 the account maintenance charges for demat account basic services need not be paid. However, if you hold this account, the value of your securities must not exceed ₹2 lakhs at any point.

Additionally, the demat account basic services in India can be availed only by individuals. Joint holdings or demat account under the name of Hindu Undivided Family (HUF) is not permitted under the BSDA account. The demat account basic services can also be availed by individuals who don’t regularly invest in stocks, mutual funds, bonds, ETFs, etc.
Also Read: How to invest in Stocks in 5 Simple Steps!

The Benefits of the Basic Service Demat Account

One of the biggest benefits of demat account basic services in India is that it helps cut down significantly on costs. The primary account maintenance charges are reduced because: -

  • With demat account basic services online, the physical statements need not be mailed, and so those costs can be entirely mitigated
  • With a demat account online, the dematerialisation charges are cut off
  • Finally, the annual maintenance charges that amount up to between ₹600 and ₹800 are reduced with demat account basic services

What Are the Limitations of a Basic Service Demat Account?

A basic service demat account comes with some limitations for investors. Firstly, investors cannot have more than Rs 2 lakh, including the principal amount and profits, in their BSDA account at any point.

Suppose you have invested Rs 1.5 lakh and earned a profit of Rs 60,000. Therefore, your total holding will come to Rs 2.1 lakh. In that case, your basic service demat account will get converted into a full-service demat account.

In a full-service demat account, you will have to pay a monthly maintenance fee of Rs 25, along with 18% GST. Additionally, institutional investors cannot open a BSDA account because they are for retail investors only.

Is it Possible to Convert a Full-Service Demat Account into a BSDA Account?

Yes, it is possible to convert a regular demat account into a BSDA account. But SEBI always verifies the status of the investor before allowing such conversions. Therefore, whether your full-service demat account will get into a BSDA account depends on the approval of the market regulator.

But before submitting the request to convert your existing demat account with basic services, you need to ensure that you don’t have any other demat account in your name. If you have more than one Demat account, your application will get automatically rejected.

Additionally, if the holding of your Demat account exceeds Rs 2 lakh, you won’t be able to convert it into a Demat account. If you open another account or your holdings exceed Rs 2 lakh, your BSDA account will become a full-service demat account.

Eligibility Criteria to Avail of Demat Account Basic Services in India

SEBI has outlined certain eligibility criteria for holding a BSDA account. An individual can open a BSDA only if they meet the following criteria: -

  • The individual should be the sole owner of the basic service demat account online
  • The individual must not hold any other demat account
  • The total value of the shares must not exceed ₹2 lakhs at any point. The closing prices of the securities and the portfolio size are examined daily by the depository participants, and if they witness it to exceed ₹2 lakhs, they convert your BSDA to a regular demat account.
    Also Read: Eligibility Criteria to Open a Demat Account

The demat account basic services online enable small investors to engage with the capital markets without having to worry about the prohibitive demat cost. By availing of the demat account basic services online, investors can conveniently invest in the capital markets even with limited funds.

Chandresh Khona
Team Espresso

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