What is a Demat Account
A demat account is required by every type of investor except future and options traders to hold their financial securities in the market. You can open Demat account with a SEBI registered stockbroker. There are some types of charges associated with a demat account. However, these are nominal, but altogether these charges can be a considerable amount to pay your DP. These charges discourage small investors from entering the stock market for making investments. Such issues have been resolved by the market regulator, Securities Exchange Board of India (SEBI).
Basic Services Demat Account (BSDA)
Basic Services Demat Account (BSDA) was introduced by SEBI to encourage retail investors to participate in the stock markets. There are a number of retail investors who are interested in the equities but do not encash the opportunities due to the burden of investing cost. BSDA has reduced the investment cost for small investors. Here are the basic features of BSDA that you need to know.
1. Account Maintenance Charges (AMC)
The AMC charges for BSDA are very low. In fact, it is free if your demat holding value is less than Rs.50,000. If the holding value exceeds Rs.50,000 but less than Rs.2,00,000 then your DP will charge a very small amount of money as AMC for the BSDA.
2. Limited Services
BSDA is limited to retail investors. They can hold total financial securities of up to Rs.2 lakhs at any point in time. If the total holdings in your BSDA, your Depository Participant will change the account status as a normal demat account and charges will be increased.
One should note that this limit of Rs.2 lakhs is assessed by DP on a daily basis. It means each day the closing value of your holdings in your BSDA can not exceed Rs.2 lakhs. If at any day, the holding value exceeds Rs. 2 lakhs, your DPs can levy non-BSDA charges from that date onwards.
3. Account Holder Limitations
BSDA can be opened in the name of an individual only. It cannot be in the name of HUF (Hindu Undivided Family). A joint account is also not permitted. As per SEBI directive, an investor can open only one BSDA account and there should not be any other demat account on the same PAN card.
4. Account Statement
DP provides transaction statements to a BSDA account holder via email and to get a physical statement, the account holder may be charged. However, SEBI is taking care of the retail investors and mandates SMS alerts to the BSDA holder whenever his account gets debited.
It should be noted that your DP will not provide statements if there is no transaction in a quarter or the BSDA balance is zero.
5. Conversion of Account
An investor can convert a normal demat account to BSDA itself or vice versa. The process is hassle-free. If your holdings are less than Rs.2 lakhs consistently then you can make a request in writing to your DP. You need to mention the reason why you are shifting your account into a BSDA account.
This is all about regular Demat meaning and Basic Services Demat Account. The central depositories, CDSL and NSDL, provide information on DPs eligible for BSDA on a monthly basis. You can choose a DP from the issued list to open your BSDA.
Thus, as a retail investor, you need not worry about investing cost in the share market. Just open a Basic Services Demat Account with a DP and go to your way of investing.