Basic services demat account for small investors

Introduced by SEBI, basic service demat accounts will offer limited services and reduced costs compared to conventional demat account

Most of us who don’t invest regularly in stocks, bonds, gold ETFs, IPO, etc may find maintaining our demat accounts a pain because of the charges. The costs, such as annual maintenance and statement charges, make these accounts relatively expensive.

But with the introduction of basic service demat account (BSDA) by SEBI (Securities and Exchange Board of India), the annual maintenance charges structure will be on a slab basis. Here we provide you with the fundamental information about BSDA.

Who can open a basic service demat account?

The basic services demat account promises to provide limited services at reduced costs to retail investors. These accounts are also called no-frills or basic trading accounts. An individual—who currently has a demat account or plans to open a demat account where he is the only first holder—will be allowed to open the BSDA. The individual needs to ensure that the value of securities held in his basic trading account will not be more than Rs. 2 lakh at any given point of time.

According to SEBI circular, all depository participants (DPs) will make basic trading accounts available with limited services and reduced costs. DPs’ will offer BSDA from 1 October 2012. Remember that you are allowed to open only one BSDA across all DPs.

What is the cost structure?

As mentioned earlier, the annual maintenance charges structure will be on a slab basis. If you hold investments worth up to Rs. 50,000, there is no annual maintenance charge. However, if you hold investments above Rs. 50,000 up to Rs. 2 lakh, you will be charged an annual maintenance fee of Rs. 100. These BSDA will also offer SMS alert facility for debit transactions.

Usually, a demat account is opened free of cost. However, DPs—such as banks and brokerages—may collect annual charges upfront at the time of opening a free demat account. At present, many DPs charge between Rs. 300 and Rs. 500 as annual maintenance charge regardless of the amount in the account.

Who will determine the value of investments in BSDA?

SEBI has assigned DPs to determine the value of holding on the basis of the daily closing price or NAV (net asset value) of the securities or units of mutual funds. If the value of your holdings exceeds the slabs mentioned above, DP’s are permitted to charge you the same as they charge non-BSDA regular demat accounts.

Services for basic services demat accounts

Transaction statements shall be sent to the account holder at the end of each quarter. If there are no transactions in any quarter, no transaction statement may be sent for that quarter. If there are no transactions and no security balance in an account, then no further transaction statement needs to be provided. Transaction statement shall be required to be provided for the quarter in which the account became a zero balance account.

Are there any statement charges?

For electronic statements, you don’t have to pay anything. But for physical statements, DPs have to provide two statements free of cost to you during the billing cycle. But additional statements will be charged a fee, which cannot be more than Rs. 25. For accounts where there are transactions, you will get an annual statement of holding, according to your choice—electronically or physical.

Can I convert my current demat account into BSDA?

If you hold an active demat account with a DP, you can ask the DP to convert your demat account into BSDA on the date of the next billing cycle based on value of holding of securities in the account as on the last day of previous billing cycle.

Thus, BSDA will offer limited services and reduced costs compared to conventional demat accounts and can be held by only single account holders. These accounts are expected to make investing in stocks, IPOs, bonds and gold ETFs easier.

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