In order to trade on the stock market, individuals are required to open Demat account, which they can use to operate their trades and store their shares etc that they purchase. Generally, individuals look to diversify their investment portfolio. In addition to this, however, individuals can also diversify the depository participants such as brokers that they employ to trade and open Demat accounts with. This however is most often the case for individuals who are operating relatively large investment portfolios.
In 2012, SEBI recognised a segment of investors that were eager to invest and trade on the stock market but had a relatively small investment capacity and portfolio. As a result, SEBI launched what we now know as a BSDA account, or a Basic Service Demat Account.
What is a BSDA account?
A BSDA account is aimed to allow investors access to the stock market who operate an investment portfolio of Rs 2 lakhs or under. One key difference between a traditional Demat account and is that while multiple traditional Demat accounts can be opened with various Depository participants if you have a BSDA account, you can only open one account across all DPS. This type of basic Demat account was also the result of SEBI recognising that a lot of individuals open Demat accounts, only for it to be left idle and unused. However, these individuals would still pay the number of maintenance and other fees associated with Demat accounts.
Benefits of a BSDA Account
A Basic Service Demat Account offers individuals a number of key benefits. A majority of these pertain to charges applied to traditional Demat accounts that can be avoided through a basic Demat account.
Traditional Demat accounts include charges such as Annual Maintenance Charges (AMC), charges for physical statements as well as certain penalties such as DIS or DRF being rejected. One of the key savings a basic service Demat account offers is the annual maintenance charges that are charged on the basis of the various holding value slabs. This offers a key advantage, as individuals looking to start off with a small investment amount might see their short term earnings neutralised by the slew of maintenance and other charges they will have to pay to maintain a traditional Demat account.
1. Up to Rs 50,000: This slab attracts no maintenance charges.
2. Rs 50,001 to Rs 2,00,000: The charges here are 100 rupees per annum.
3. Above Rs. 2,00,000: This is the highest slab, and attracts a 300 rupee charge.
One of the key questions asked by individuals is if they can convert their traditional Demat accounts into BSDA accounts. Put simply, if your Demat account is the only one registered with your name, and the amount you maintain in your basic Demat account is consistently below 2lakhs, then your Demat account is automatically converted into a BSDA account. A basic service Demat account could be a good option for those looking to start out in the investment market and are not looking to invest large amounts of capital.
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