Sebi raises basic service demat account limit fivefold

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New Delhi: For small investors planning to invest in the stock market, there’s good news. The market regulator, Securities and Exchange Board of India (SEBI), has increased the limit of Basic Services Demat Account (BSDA) from ₹2 lakh to ₹10 lakh. This means a five-fold increase. Let’s understand how this increase in limit will benefit small investors.

SEBI issued a circular on June 28 announcing the increase of the BSDA limit from ₹2 lakh to ₹10 lakh. Previously, investors could hold shares or other securities up to ₹2 lakh in a BSDA. With the new limit, investors can now hold securities worth up to ₹10 lakh in a BSDA. This circular will be effective from September 1, 2024.

What is a Basic Services Demat Account (BSDA)?

BSDA, a basic version of a regular demat account, was introduced by SEBI in 2012. Its objective is to reduce the burden of demat charges on small investors. BSDA offers fewer services compared to a regular demat account and is useful for investors who do not engage heavily in trading various segments such as shares, bonds, ETFs, among others.

Conditions for Basic Services Demat Account:

According to SEBI’s circular, there are certain conditions for opening a BSDA. Firstly, an investor should have only one demat account across all depositories. Second, the investor must be the sole holder or the first holder in case of a joint demat account. Third, the value of securities held in the demat account should not exceed ₹10 lakh.

Benefits of holding a Basic Services Demat Account:

A BSDA does not incur charges similar to a regular demat account. This makes it a cost-effective option for small investors who trade infrequently. SEBI has also revised the charges for BSDA accounts. There will be no annual maintenance charge for holdings up to ₹4 lakh or for second securities. For holdings between ₹4 lakh and ₹10 lakh, an annual charge of ₹100 will apply.

Investors holding securities valued over ₹10 lakh will have their BSDA converted to a regular demat account, subject to annual maintenance charges accordingly.

BSDA account holders receive electronic statements free of cost, while they may incur charges up to ₹25 for physical statements. SEBI’s decision to increase the BSDA limit has relieved millions of small investors. Depository participants have been instructed to open BSDA for eligible investors unless they opt for a regular demat account by email. Additionally, eligible investors have two months to convert their existing demat accounts to BSDA accounts based on the increased limit.