Finnovationz - December-17-2018
This is a very important topic for small investors. The Basic Services Demat Account or BSDA is just a category of Demat Account that a customer can open if he/she meets certain criteria. BSDA is also known as no-frills account. BSDA can prove to be a very useful tool for small investors. Basic Services Demat Account (BSDA) reduces the cost of maintaining securities in Demat accounts for retail individual investors.
According to SEBI, almost 80% to 90% of the Demat account holder do not trade actively. The majority of them has little investment in shares. Still, they have to pay a hefty amount for the annual maintenance charge. This discourages them to have a Demat account. To encourage small investors SEBI has directed the Depositary participants to open no-frills account (BSDA) for the small investor.
Most of us who don't invest regularly in stocks, bonds, gold ETFs, IPO, etc may find maintaining Demat accounts a pain because of the charges. The costs, such as annual maintenance and statement charges, make these accounts relatively expensive. It becomes a costly affair when you invest a small amount in stock market & still have to pay annual maintenance charges (AMC) which are usually in the range of Rs. 300 to 750 regardless of the amount your account.
For example, Assume that you have invested Rs. 10,000 in stock market & paying Annual Maintenance Charges (AMC) of 300 to 750. Then, in this case, AMC is almost 5% of your total investment.
All the individuals who have or propose to have only one Demat account where they are the sole or first holder are eligible to have a BSDA provided that the value of securities held in the Demat account does not exceed Rupees Two Lakhs at any point of time. An individual can have only one BSDA in his/her name across all depositories.
The Annual Maintenance Charges (AMC) structure for BSDA shall be on a slab basis; if the value of holding is
The value of holding shall be determined by the DP's on the basis of the daily closing price of shares (in the case of stock market investment) or NAV (in the case of mutual fund investment) of the securities. If the value of holding in such BSDA exceeds the prescribed criteria at any date, the DPs may levy charges as applicable to regular accounts (non-BSDA) from that date onwards.
BSDA will offer limited services and reduced costs compared to conventional Demat accounts. By using BSDA you can invest in stocks, IPOs, bonds and gold ETFs easily. You can use trading tools, Softwares & other basic services of the DP. The only difference is in services regarding statements.
Transaction statements shall be sent to the account holder at the end of each quarter, provided there has been at least a single transaction in the quarter. If there are no transactions in any quarter, no transaction statement may be sent for that quarter.
If you choose to avail the electronic statements, you won't have to pay anything. However, for physical statements, DP's will 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 Rs25.
For accounts where there are transactions, you will get an annual statement of holding, as per your choice, that is electronically or physically. If there are no transactions and no security balance in an account, then no further transaction statement will be provided. For accounts with credit balance but no transactions during the year, DP’s (Depository Participants) will provide one statement of holding for the year.
Investor can avail SMS alert facility for debit transactions by registering their mobile phone number.
So this is what SEBI wanted to help retail investors with.
If you are an existing eligible individual and hold a Demat account with a DP, you should ask the depository participant (DP) to convert the account into a basic services account. DP won't tell you about BSDA, so you have to ask DP's to convert your account into BSDA. Actually, many investors don't even know that such an account actually exists. Existing Demat holder can move to BSDA from the next billing cycle if their holding is within Rs.2, 00,000 limit. You must check your annual reports to know whether AMC charges are in line with SEBI regulations. If ur DP is charging more than you can complain to SEBI.
The moment your portfolio value crosses the limits DP's will charge you the fees according to the respective slab i.e., Whenever your holding will cross 50,000 (but less than 2 lac) then you will fall into Rs. 100 AMC slab & when your holding will cross 2 lac then your account will be converted into regular Demat account. Once the holding goes above 2 lac, you again can't roll back to BSDA.
You can open multiple regular Demat accounts, but you cannot have multiple BSDA i.e., you should have only one BSDA in your name across all depositaries.
You cannot have one BSDA with SHAREKHAN & another with ZERODHA. If found, both DP's will charge you the full fee as well as an extra fee from you if they find that you have more than one BSDA. They have your PAN no. so don't think about making them fool. Many DP's are denying BSDA facility. They will ask you to close the account and go elsewhere. In such a case you can inform SEBI about this.
BSDA is suitable for small investors who invest for long term & trade rarely(2-3 times a year). But it is not suitable for traders because some brokers charge between Rs. 30 to 60 for every sell side transaction for BSDA accounts. So it is not affordable for the small investors who trade frequently. But, if you are a small investor who invest for the long term & trade rarely(2-3 times a year) then you should be thankful of SEBI.
We have tried to explain all the charges & services of BSDA in simple words.