Basic Service Demat Account (BSDA)

BSDA stands for Basic Service Demat Account. It is a specific demat account designed by the SEBI (Securities and Exchange Board of India) to enable easier and more affordable investments in stock markets. BSDA comes with lower maintenance and dematerialization costs and are usually ideal for investors with relatively smaller portfolios or newcomers to the market. 

SEBI introduced these accounts to lower the financial burden on smaller investors while encouraging higher retail participation in the Indian stock market. At the same time, these accounts are only available to those meeting a particular criteria, including holding only a single demat account where they are the first/sole holder. BSDA accounts also have limits on holding value. If the holdings exceed this threshold, then the account may be converted into a full-service demat account or FSDA. 

Features of BSDA

Now that you have an idea of what a BSDA means, it is important to look at some of its key features. These include the following: 

• Lower annual maintenance charges (AMCs) than regular demat accounts 
• No AMC for smaller holdings below ₹50,000
• No mandatory minimum balance requirements in most cases 
• Lower dematerialization (conversion of physical share certificates into the electronic format) and rematerialization (vice versa) charges
• Easier trading and investment management with periodic transaction statements and SMS alerts for account activity 
• Convenient portfolio tracking and electronic storage of securities 
• Easy conversion to a regular demat account if necessary 

One thing worth noting is that BSDA accounts have limits on the number of free transactions each year. 

Understanding AMC in BSDAs

AMCs (annual maintenance charges) are imposed by DPs (depository participants) to maintain demat accounts, and it is the same for Basic Service Demat Accounts. The amount may vary, although it is usually lower for these accounts in comparison to regular demat accounts, particularly if the portfolios are smaller. 

AMCs are based on the holding value, with zero AMCs till a particular limit, and regular demat charges apply for exceeding this amount. 

Eligibility Criteria for BSDA Account

The eligibility criteria for BSDA accounts include the following: 

• The investor should be the first or sole holder of the demat account 
• He/she can only have one demat account across all DPs (depositories)
• The total value of securities in the account should not cross ₹2 lakh at any point 
• BSDA accounts cannot be joint accounts, and while any full-service demat account may be converted to a  BSDA, it is subject to SEBI verification 

Can a Full-Service Demat Account be Transformed into a BSDA Account?

Yes, it is technically possible to convert a full-service demat account (FSDA) into a BSDA account, although it is subject to SEBI verification and other conditions. The primary criterion is that the investor should not have any other demat accounts, and the value of holdings in the BSDA should be below ₹2 lakh. You can reach out to your DP for guidance on the process and submit a formal request for conversion with all necessary documents. After verification and approvals, the DP will carry out the conversion process accordingly. 

Note that if the holding value crosses the limit, then the BSDA will be converted to a full-service demat account again. Opening another demat account will also trigger the same conversion. 

Benefits of a BSDA

A basic service demat account comes with several benefits, including the following: 

• Zero or lower AMCs for smaller investment portfolios 
• Lower dematerialization or rematerialization charges for investors 
• Simplified basic services with easy portfolio tracking and alerts 
• Higher affordability and easier trading for newcomers and smaller retail investors 
• Higher financial inclusion for stock market investing as per the goal of SEBI

How to Open a BSDA

The process of opening a BSDA account is simple and does not take too much time. Let’s say you’re setting up this account at Groww. The steps to be followed include: 

• Step 1- Visit the Groww official website or download the mobile app 
• Step 2- Create an account with your mobile number and email address 
• Step 3- Verify the mobile number through the OTP that you receive
• Step 4- Enter the PAN and confirm your identity 
• Step 5- Provide your bank details, including the IFSC code, bank account number, and so on
• Step 6- Complete your KYC process by submitting documents online 
• Step 7- E-sign the account opening form after completing it 
• Step 8- Upon successful verification, the setting up of your account will be confirmed

What are the charges levied on BSDA?

For a Basic Service Demat Account, the AMC is waived off in case the value of holdings is up to ₹50,000. In case it is between ₹50,001 and ₹2,00,000, the DP may charge a nominal AMC that is a maximum of ₹100 per year. If, however, the holding value surpasses ₹2,00,000, the DP may charge regular demat account fees for the same. Also note that physical statements may come with nominal charges, which are usually around ₹25 per statement. Electronic statements are free of cost, though. 

SEBI Stipulates the Following Conditions for BSDA Accounts

There are several conditions stipulated by SEBI for BSDA accounts, including: 

• Only one BSDA is allowed for each PAN
• The customer should be the first/sole holder of the account, and he/she cannot have any other such account across all DPs
• The total value of securities in these accounts cannot cross ₹2 lakh at any given time. If it does, then the account may be converted into a regular demat account with standard charges.
• There will be no AMCs in case the holding value is less than ₹50,000, while it is a maximum of ₹100 per year in case the value is up to ₹2,00,000. Beyond this threshold, DPs may levy regular charges from that date.

Conclusion

If you are new to stock market investing or have a smaller portfolio, a Basic Service Demat Account may fit the bill perfectly. With its lower AMCs and transaction costs, it may enable more affordable investments and seamless portfolio tracking.