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.
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.
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
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.
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Frequently Asked Questions
If the collective value of your financial assets (stocks and mutual funds) falls below ₹2 lakhs, you automatically qualify for the BSDA. While applying for a demat account offline, you have to check the box that says “BSDA facility.” If you are applying for a demat account online, your account will automatically be shifted to BSDA if your securities are below ₹2 lakhs.
If your transactions are not frequent and your securities don’t exceed ₹2 lakhs, then you can convert your demat account online to a BSDA. There are no costs involved in making the conversion. The process to transform your account is simple - you only have to inform the depository participant to shift your account.
The charges levied on the BSDA change based on the broker; however, generally, the annual maintenance charges are nil below holdings of ₹50,000, and between ₹50,000 and ₹2 lakhs, the charges are ₹100. Additional charges include charges for additional physical statements, bounce charges, charges levied for rejection of a Delivery Instruction Slip (DIS), and fees for rejection of a Demat Request Form (DRF).