In 2012, SEBI (Securities and Exchange Board of India) introduced a novel type of DEMAT account called the Basic Service Demat Account (BSDA). It is primarily designed for small investors who are not interested in actively trading or investing in Stocks, or who do not possess a large capital base, because it is considerably less expensive than maintaining a typical Demat Account.
To open a demat account and build a Basic Services Demat Account (BSDA), you need to follow the standard procedures for opening a demat account with a few additional criteria specific to BSDA. The only significant distinction between BSDA and regular demat accounts is the cost of upkeep. If you create a BSDA demat account and have holdings under Rs. 50,000, you won’t have to pay any maintenance fees.
Can a Full-Service Demat Account be converted to a BSDA Account?
Any full-service Demat account can technically be changed into a basic-service Demat account. Before approving such a shift, the market regulator SEBI (Securities & Exchange Board of India) may, however, check the investor’s status. Therefore, the market regulator’s clearance is required to change a full-service Demat account into a basic-service Demat account.
However, you must make sure that you do not operate any other Demat accounts in your sole capacity before submitting a request to convert your existing account into a BSDA account. Your application will be summarily denied if you maintain several accounts.
Additionally, your BSDA account will be converted into a full-service Demat account if, after converting your current Demat account into a BSDA Demat account, your holding value surpasses INR 2 lakh or you register another Demat account.
Advantages of BSDA
The BSDA offers a number of advantages when it comes to reducing costs and expenses. The main advantages of BSDA are listed below.
- Costs associated with mailing customers tangible statements are reduced.
- Dematerialization fees are ceased.
- Annual maintenance fees between 600 and 800 rupees are decreased.
Limitations of BSDA
Some restrictions apply to a basic service demat account:
- You are not permitted to hold more than INR 2 lakh (capital plus profit) in your demat account at any given moment.
- BSDA accounts may only be created by a single account holder, hence joint applications are not accepted.
- Only individual investors, not institutional investors, are permitted to open BSDA Demat accounts.
Characteristics Of A Basic Service Account Demat
While a BDSA offers all the capabilities of a conventional Demat account, there are a few elements that set it apart from regular Demat accounts. The following are the BDSA-specific features:
- Investors get a BDSA transaction statement every quarter. As a result, you receive a complete accounting of your transactions every three months. However, if there are no transactions, this statement won’t be given. These statements are also available in printed and electronic versions.
- Additionally, according to the preference of the account holder, investors get a yearly holding statement in either paper or electronic form. In the latter situation, it is delivered via mail to the account holder’s registered address.
- Using a registered cellphone number, investors may receive SMS notifications for their BDSA transactions.
- In addition, investors receive two delivery instruction slips when their BDSA is opened.
Differences Between Regular Demat Accounts And BDSAs
BDSAs and standard Demat accounts differ from one another in a number of ways, in addition to the portfolio size restriction. The annual maintenance costs, or AMCs, which are the expense of keeping the accounts, are the most significant of these variations.
BDSAs are less expensive to maintain than regular Demat accounts because the latter are free for portfolio values under Rs. 50,000. The AMC for a BDSA is Rs.100 for portfolio values between Rs.50,000 and Rs. 2,000,000.
However, if the value of your portfolio were to surpass Rs. 2,00,000, a standard Demat account would be created in place of your BDSA. A Depository Participant, often known as a DP, is the one who actually calculates the daily closing prices to establish the size of the portfolio.
These figures are computed at the conclusion of each trading day and contrasted with the BDSA account limitations. Higher AMCs will be charged if the value is higher than the cap.
The ability to open only one BDSA across all DPs while maintaining several Demat accounts is the only significant distinction between a BDSA and a conventional Demat account.
Conclusion
In conclusion, BDSAs are far more manageable than Demat accounts since they are significantly less costly. The cost-effectiveness of BDSAs makes them a huge benefit for small investors with tiny principles, who may trade stocks and profit without losing a large portion of it to AMCs. By using a demat account app, you may have a smooth trading experience that makes it easy to manage your money and place transactions.