Basic Services Demat Account (BSDA)- Eligibility, Types and How to Open One
In a bid to recognise small investors who wish to participate in the stock market, but don’t have the investment capacity or prior experience, SEBI (Securities & Exchange Board of India) launched BSDA or Basic Service DEMAT Account. In this blog, we have explained how you can open a BSDA account to start trading.
What is a BSDA Account?
A Basic Service Demat Account, the full form of BSDA, is a type of Demat account introduced by SEBI (Securities Exchange Board of India) in 2012 that aims to motivate small investors who don’t have any prior experience of the stock market to enter the market and invest or trade.
Although a BSDA account offers similar benefits as a Demat account, BSDA maintenance charges are different. The main point of difference is, a BSDA account holder does not have to pay charges if their account holds an amount below ₹50,000, unlike Demat account holders. Moreover, if a BSDA account holds an amount between ₹50,000 and ₹2 lakh, the account holder has to pay a nominal charge of ₹100 only.
Who is Eligible to Open a BSDA Account?
A BSDA account is cost-efficient but people have to fulfil certain eligibility parameters to be able to open one. Detailed below are the eligibility criteria to open a BSDA account:
- The investor has to open a BSDA account in their sole capacity.
- An individual can hold only one BSDA account at a time.
- The investor must be a first-time Demat account holder.
- The total value of the holdings of the BSDA account (principal + profit) should not exceed ₹2 lakh in a financial year.
- If an individual is a part of a joint Demat account, he or she should not be the primary account holder.
Benefits of a BSDA Account
Listed below are the key benefits of a BSDA account:
- You do not have to pay charges for dematerialisation.
- Annual maintenance charges that have to be paid depending on the value slab of the account. Moreover, as mentioned above, if the BSDA account holdings amount to less than ₹50,000, it will not attract any maintenance charge.
- Investors can choose to receive either a hard copy or a soft copy of the annual holding statement. Hard copies are sent to the BSDA account holder’s registered address via post. But, soft copies are more cost-effective.
- When someone opens their BSDA account and starts trading, they will receive two hard copies of their annual statements, absolutely free of cost.
How to Open a Basic Service Demat Account
First, Visit your bank and talk to officials who will then guide you through the process. The process is similar to opening a Demat account with a bank.
But, there is another process for opening a BSDA account. This entails opening a BSDA account via a stockbroking firm. A major benefit of this option is, you can consult a financial advisor who can advise you on what stocks to purchase.
Before we delve into details, we have to first understand what a DP (Depository Participant) is. In simple words, a DP is an intermediary that helps in transactions by placing orders on investors’ behalf. Investors can open Demat accounts with DPs and then trade.
A DP acts as an agent of either or both NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) and facilitates the efficient management of assets. In India, DPs automatically convert eligible accounts into BSDA accounts.
What are the Charges Levied on BSDA?
Detailed below are the applicable charges levied on Basic Service Demat Account:
- Maintenance fees will not be levied if the value of the BSDA account holdings is equal to or below ₹50,000.
- The applicable maintenance charge will be ₹100 + GST if the value of the account holdings falls between ₹50,001 and ₹2 lakh.
- If the value of your account holdings exceeds ₹2 lakh, the annual maintenance charges will be the same as that of a Demat account.
- Some of the other charges that BSDA accounts levy include bounce charges, rejection of DIS (Delivery Instruction Slip), rejection of DRF (Demat Rejection Form) etc.
Also Read
How to Convert a Demat Account into a BSDA?
There are specified circumstances under which a Demat account can be converted to a BSDA account and SEBI is responsible for acting as a decision-maker in this regard. The apex body will minutely assess the investor’s status before permitting a conversion.
There are a few things you need to remember before you place a request in front of the market regulator to convert your Demat account into BSDA:
- You must not be operating any other Demat account. If you have multiple Demat accounts, your application will be automatically rejected.
- If, after conversion of your Demat account into a BSDA account, it is found that the account holdings exceed ₹2 lakh, the account will get converted into a full-service Demat account.
Final Word
BSDA (Basic Service Demat Accounts) offer limited services at reduced expenses for retail investors. Anyone with one Demat account can convert it to BSDA, provided they meet the eligibility criteria. This measure was taken to encourage the broader financial inclusion of retail investors in India.
FAQs
Ans: A Demat account is a repository allowing you to store and manage securities in digital format. It is a much better alternative to a physical share certificate as it cannot be misplaced or damaged. It offers quick and convenient access, and real-time monitoring and makes trading much easier.
Ans: These are some of the applicable charges for a regular Demat account:
• Annual maintenance charges
• Account opening charges
• Custodian fee/safety charges
• Per folio charge on debits
• Transaction charges
• Dematerialisation charges
• Remat charges
• Charges for physical statements
Ans: If the value of your holdings in a BSDA account increases over Rs. 2 lakh, you will no longer be eligible for its facilities. Hence, your account will be converted into a regular account and charged as per standard rates specified by the broker.
Ans: Many Depository Participants nowadays offer nominal or zero charges for opening a new Demat account. Others offer low transaction charges or waive off annual maintenance charges for the first year. Many brokerage firms and financial institutions do not impose opening charges for three-in-one accounts.
Ans: A Depository Participant acts as an agent connecting investors to either of the two depositories in India- CSDL or NSDL. When you place a ‘buy’ or ‘sell’ request in your trading account, the DP forwards this to the stock exchange along with other important details.
Ans: SEBI has asked DPs (Depository Participants) to decide on the value of holdings depending on the daily closing price or NAV (Net Asset Value) of the underlying securities or mutual fund units. DPs will charge the same fees as Demat accounts if the value of the holdings exceeds the specified amounts.
Ans. No, you can open only one account under the BSDA category. Moreover, you should not be a Demat account holder. Another important point you need to remember is that the value of the holdings of a BSDA account should not exceed ₹2 lakh at any given point in time.
Ans: Yes, registration for SMS alerts is compulsory for BSDA accounts.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
