When you have a bank account in any leading bank, and wish to trade on the stock exchange, you may be offered a free Demat account in the same bank. Alternatively, you may open a trading account and a Demat account with an online broker like Motilal Oswal and begin investing in securities. However, if you are a small investor who does not utilize your Demat account to its full potential, you may be eligible to open a Basic Service Demat Account.
When you open an online Demat account, you may not incur any charges or fees. However, while you continue trading and using your Demat account regularly, you will be charged for operating it by your depository participant (DP) on an annual basis. For a BSDA account, however, charges are non-existent, or very minimal, as the account is operated very infrequently and charges are levied accordingly. It is important to note that a Basic Demat Account of this sort can be held or opened by individual investors only.
Under the BSDA category, only one Demat account can be opened/held by an individual investor. The candidate investor who wishes to hold a BSDA account has to meet the following eligibility criteria:
- The BSDA account held by an investor must be held by that investor alone, and not jointly.
- The holder of a Basic Service Demat Account should not hold any other Demat account with the investor as the sole holder.
- At any given time, the investor’s holding value should not be in excess of Rs. 2 lakhs.
- Any investor who wishes to open trading account and a regular Demat account may do so. If such an investor wishes to change a regular Demat account into a BSDA account, they can do so, as long as no other Demat account exists under the investor’s PAN number.
SEBI or the Securities Exchange Board of India introduced the concept of a BSDA Account to lower the burden of cost to investors who unnecessarily have to pay charges for accounts they hardly operate. As per the directive issued by SEBI, no Annual Maintenance Cost is to be levied for holdings worth a maximum of Rs. 50,ooo in a BSDA Account. For the value of holdings in the range of Rs. 50,000-Rs. 200,ooo, an annual fee of Rs. 100 is levied.
When you wish to trade in securities frequently, a regular Demat Account can be opened, linked to your trading account, at any reputed trader like Motilal Oswal. In case you feel you may not be a regular and frequent investor, a BSDA Account holding is a sensible option.
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