The Securities and Exchange Board of India (Sebi) proposed several changes to the Basic Service Demat Account (BSDA) rules, from higher limits to nominal yearly maintenance fees, to encourage more people, mainly small investors, to trade in the stock market and ensure their financial inclusion. Its June 5 proposal seeks to hike the BSDA limit from Rs 2 lakh to Rs 10 lakh to allow people to invest more while retaining the benefits of a BSDA account.

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What Is a BSDA Account?

To qualify for a BSDA account, the value of the investor’s portfolio must not exceed Rs 2 lakh. In that case, they are eligible for zero annual maintenance fees. If it crosses that limit, it becomes a regular demat account where the investor must pay an annual maintenance charge. The account also comes with zero fees for online statements. For a physical statement, it charges Rs 25.

Proposed Changes

Sebi considers extending the zero annual maintenance charge in a BSDA account up to portfolio value limit Rs 4 lakh, including debt and non-debt securities. If it exceeds Rs 4 lakh but under Rs 10 lakh, the charge will be Rs 100. If the portfolio value crosses Rs 10 lakh, it will become a regular demat account, and standard AMC will apply. Typically, AMC charges for a regular demat account range from Rs 300 to Rs 1,000.

Eligibility for BSDA Account

The person must have only one demat account in their name, as only one BSDA account per investor is permitted across depositories. Also, the portfolio value should be less than Rs 10 lakh for all securities (debt or non-debt) at any point to stay eligible for BSDA.

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Benefits for Senior Citizens

The hike in the BSDA limit could encourage more senior citizens to participate in the stock market via their demat accounts. They can buy mutual funds and other assets besides stocks through their demat accounts, where assets exceeding Rs 4 lakh to up to Rs 10 lakh will attract a minuscule Rs 100 maintenance fee annually. A BSDA will also offer them ease of investing in diverse instruments besides allowing them to keep records of different assets in an orderly manner for almost free. Meanwhile, Sebi has sought public feedback on its proposal by June 26, 2024.

The demat account system was introduced in India in 1996 to reduce paperwork in securities trade. In 2012, Sebi introduced the BSDA accounts. A demat account allows you to keep your investments in electronic form in one place and easily traceable. You can buy and store stocks, mutual funds, exchange-traded funds (ETFs), bonds, etc., in a demat account.