A Demat (Dematerialised) account allows you to keep all your stocks and other securities in electronic form and makes trading more convenient. However, you have to pay several fees and charges for the convenience of easy trading, including transaction charges, annual maintenance charges, safety charges and more.
Is there any way you can avoid paying these expenses? Yes, a Basic Services Demat Account (BSDA) may help you in this regard. It allows small investors to open and maintain a Demat account at reduced costs.
Read along to know more about BSDA!
SEBI (Securities and Exchange Board of India) came to know that the majority of Demat account holders did not use their accounts much. The capital market regulator introduced BSDA in 2012 for small investors who did not invest in stocks, bonds or ETFs regularly.
BSDA allowed investors with portfolios below Rs. 2,00,000 to open and maintain a Demat account at reduced charges. However, investors applying for BSDA would need to have a single Demat account across all depositories.
No annual maintenance charges (AMC) are charged for account holders with a total value of holdings below a specific cut-off value. Moreover, multiple additional costs are the same as that of a regular Demat account.
The holdings value is determined by a stock’s daily closing price or the NAV (Net Asset Value) of units of mutual funds. If these holdings cross the set limit during any period, the depository participant (DP) can levy full charges as regular accounts from that date.
Also read: What is a zero brokerage DEMAT account?
Any individual can open a BSDA account and can even convert other types of Demat accounts to it. However, they will need to fulfil a few simple conditions:
For accounts with transactions, the DP will send one physical transaction statement for every quarter. Accounts with no transactions or zero balance at year’s end will not receive transaction statements.
In the case of accounts with zero balance and those whose balance becomes zero at the year’s end, the account holder will receive one annual physical statement of holding at the stated address.
For accounts with transactions, account-holders will receive holding statements as per their chosen option.
DPs will send you two physical statements of holding for free every year. If you want an additional physical statement, you will have to pay up to Rs. 25 per statement. No charges are levied for electronic statements.
Existing Demat accounts can be converted into BSDA under certain conditions. To initiate this process, you will have to submit a request letter to the respective depository. Then, you will have to fill out the declaration for the BSDA facility at least 15 days before the next billing cycle.
The regulator will check with the depository and exercise the right to convert your Demat account. For this to happen, the value of your holdings must be below Rs. 2 lakh or Rs. 50,000, depending on the nature of securities. You must also make sure that you have no other Demat account to convert to BSDA.
Besides BSDA, there are three different types of Demat accounts:
Any resident Indian citizen can use this type of Demat account. It enables easy transfer and transaction for equity shares. The fee charged for regular Demat depends on the amount held in the account.
This is available for NRIs (non-resident Indians) wanting to invest in the Indian stock market. Using this, investors outside the country can transfer funds from an NRE bank account linked to it.
This is another type of Demat account for NRIs, but investors cannot transfer shares abroad through it.
Also read: Top 10 DEMAT accounts in India in 2022
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.
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.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.