what is basic services demat account (bsda)?
TRANSCRIPT
What is Basic Service Demat
Account?
INDEX.Introduction.
Eligibility Criterial.
Charges.
Services.
Changes of statements.
Conclusion.
INTRODUCTION.
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.
Almost 70% to 80% of the Demat account holders do not trade actively. The majority of them have 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 and still have to pay annual maintenance charges (AMC) which are usually in the range of Rs. 300 to 750 regardless of the amount in 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 such cases, AMC is almost 5% of your total investment.
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ELIGIBILITY CRITERIA.
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 oneBSDA in his/her name across all depositories.
CHARGES.
The Annual Maintenance Charges (AMC) structure for BSDA is based on a slab basis; if the value of holding is
• up to Rs. 50,000, then there will be no AMC i.e, Investor need not to pay any annual maintenance charge
• for value of holding from Rs 50,001 to Rs 200,000, there will be AMC of Rs. 100.
The value of holding shall be determined by the DP’s on the basis of the daily closing price. 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.
SERVICES.
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. You can use trading tools, Softwares and other basic services of the DP. The only difference is in services regarding statements.
CHARGES OF STATEMENTS.
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.
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 the DP 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 your DP is charging more then 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 lakh) then you will fall into Rs. 100 AMC slab and when your holding will cross 2 lakh then your account will be converted into regular Demat account. Once the holding goes above 2 lakh, 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.
CONCLUSION.
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.
As shown in the picture below, you can clearly see the extra debit transaction charges HDFC charging to the BSDA holders.
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.
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