If you are interested in investing in the stock market, you will need a demat account. The annual maintenance charges of a regular Demat account are very high, due to which low value investors are not participating in the stock market.
In 2012, SEBI made the move to introduce the BSDA Demat account, which allows investors to provide basic services at a low price.
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What is BSDA Demat Account?
BSDA (Basic Service Demat Account) is designed to provide all basic services at low cost to retail investors. It was introduced by SEBI (Securities and Exchange Board of India) in 2012, BSDA aims to provide limited services to individual retail investors by providing maintenance charges for demat accounts at an affordable price.
The basic demat account also has some limitations. Investors can hold only up to ₹2 lakh in a BSDA or Basic Demat account at any time. For example, suppose you invested ₹2 lakh and made a profit of ₹10,000. Now your portfolio holdings will be ₹2.1 lakh. In such case, the basic service demat account will be converted into a regular or full-service demat account (FSDA).
Charges for BSDA Account
| Slab | Highest Holding Value | AMC (exclusive of GST) |
| 1 | Up to ₹50,000 | ₹0 |
| 2 | ₹50,001 to ₹2,00,000 | ₹20-₹100 per quarter |
| 3 | Above ₹2,00,000 | ₹50-₹200 per quarter |
Eligibility criteria for opening a BSDA account:
In order to open a Basic Service Demat account, you need to meet certain criteria.
- The BSDA account is for retail investors with small portfolio holdings. Your portfolio should remain under 2 lakh rupees.
- One investor can have only one BSDA account across all depository participants.
- According to SEBI regulations, the applicant should be a resident of India.
How do I open a BSDA account?
You can easily create a BSDA account. If you’ve already got a demat with DP, you can easily convert into BSDA. All the Depository Participant have been asked to open a BSDA account for retail investors who meets the criteria.
Follow step by step guide to create BSDA account?
- Firstly, check your criteria to see if you are eligible to create a BSDA account.
- Choose a Depository participant or stockbroker to open a basic service demat account.
- Submit all the required documents and signatures for completion of the registration process.
- After successful verification of your submitted documents, your account will be activated successfully. You can start using the BSDA account.
Advantages & Disadvantages Of BSDA account
| Advantages Of BSDA | Disadvantages Of BSDA |
| It is cost-effective for small investors as it comes with low maintenance charges. | BSDA accounts are limited to a number of free transactions per month. |
| The amount levied to the holder’s, i.e. 2 lakhs, ensures burden-free investment. | As compared to regular saving accounts, BSDA account has fewer types of investment options. |
| The account removes the physical share certificates, supporting smooth trading. | BSDA account levied charges if the transaction is more than 2 Lakhs. Additionally, if the account is closed soon after it was opened, this also leads to certain charges. |
Difference between Regular Demat Account Vs BSDA Account
| Aspect | Basic Services Demat Account (BSDA) | Regular Demat Account |
|---|---|---|
| Eligibility Criteria | Small investors | May have more stringent eligibility conditions |
| Maintenance Charges | Zero or low maintenance charges | Annual maintenance charges maybe higher |
| Transaction Limits | Limits on the value of up to ₹2 lakh in BSDA securities held | Higher transaction limits for more substantial investors |
| Documentation Process | Simplified, user-friendly | May involve a more elaborate documentation process |
| Applicability to Small Investors | Specifically crafted for small investors | Suitable for investors with larger port |
Conclusion
BSDA demat account, which is completely different from regular demat account. Regular demat accounts offer many services like customer support, research support & assistance for simple and straightforward investment. But with a BSDA account, you will get limited service at zero or low charges.