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What is Basic Service Demat Account?

A Basic Service Demat Account (BSDA) is a type of demat account designed to make it easier for small investors to invest in the stock market. The Securities and Exchange Board of India (SEBI) introduced the BSDA scheme in 2012. 

 

This was done in a bid to promote financial inclusion and encourage more people to invest in the stock market. However, a basic service demat account is different from a regular demat account, especially regarding the BSDA charges applicable. 

Features of a Basic Service Demat Account

The basic service demat account has several features that make it different from a regular demat account. Some of the key features are as follows:

  • Lower Charges:  One of the most significant features is that it has lower charges than a regular demat account. For investors with a portfolio value of up to ₹50,000, there are no account maintenance charges for the first year. 

     

    For those with a portfolio value between ₹50,001 and ₹2,00,000, the account maintenance charges are capped at ₹100 per annum.
     

  • Limitations on Holdings:  Basic service demat accounts have limitations on the number of securities that can be held in the account. Investors with a portfolio value of up to ₹50,000 can hold up to two securities in their BSDA.

    For those with a portfolio value between ₹50,001 and ₹2,00,000, the number of securities that can be held is limited to ten.

 

  • No Penalty: Another key feature of a basic service demat account is that there are no penalties for non-maintenance of the minimum balance or for not carrying out any transactions during a specified period.
     
  • Conversion to Regular Account: If the value of the securities in the basic service demat account exceeds ₹2,00,000 at any point, the account will be converted to a regular demat account, and the regular account maintenance charges will apply.

Benefits of a Basic Service Demat Account

The basic service demat account provides several benefits to small investors who want to invest in the stock market. Some of the key benefits are as follows. 

 

  • Lower Costs: As mentioned earlier, BSDAs have lower costs than regular demat accounts. This makes it easier for small investors to invest in the stock market without worrying about high charges eating into their returns.

 

  • Easy to Maintain: They are easy to maintain, as there are no penalties for non-maintenance of the minimum balance or for not carrying out any transactions during a specified period.

 

  • Encourages Small Investments: The BSDA scheme is designed to encourage small investors to invest in the stock market. The lower charges and limitations on holdings make it easier for small investors to invest in the stock market.

Eligibility for a Basic Service Demat Account

To be eligible for a basic service demat account, you must fulfil the following criteria:

 

  • You must have only one BSDA across all depositories

  • The value of the securities held in the account must not exceed ₹2 Lakhs at any point

  • You must not have any other demat account.

Documents Required for Opening a Basic Service Demat Account

The documents required for opening a basic service demat account are similar to those required for opening a regular demat account. The documents required are:

 

  • Proof of Identity: This can be a valid passport, PAN card, Voter ID card, Aadhaar card, or driving licence. The document should be self-attested and submitted in original for verification.

  • Proof of Address: This can be a valid passport, Voter ID card, Aadhaar card, or driving licence. The document should be self-attested and submitted in original for verification.

  • PAN Card: A PAN card is mandatory for opening a demat account. The document should be self-attested and submitted in original for verification.

  • Passport Size Photographs: Two passport size photographs are required for opening a demat account. The photographs should be recent and coloured.
     

Apart from the above documents, some brokers may also require additional documents like income proof or bank statements to open a basic service demat account. It is advisable to check with the broker about the required documents before opening an account.

How to Open a Basic Service Demat Account?

 

Opening a basic service demat account is a simple and hassle-free process. Here are the steps involved in opening a basic services demat account:

 

  • Step 1: Choose a Depository Participant

    The first step in opening a basic service demat account is to choose a depository participant. You can choose from any of the two depositories in India - NSDL or CDSL.

     

  • Step 2: Submit the Application Form

    Once you have chosen a depository participant, you need to submit the application form for opening a basic service demat account. The application form can be downloaded from the depository participant's website or obtained from their office.

     

  • Step 3: Submit the Required Documents

    You need to submit the required documents along with the application form. The documents required for opening a basic service demat account include identity proof, address proof, and a passport-sized photograph.

     

  • Step 4: Verification of Documents

    The depository participant verifies the documents submitted by you. Once the documents are verified, you are given a unique demat account number (DP ID).

     

  • Step 5: Activation of Account

    Once the demat account is activated, you can start using the account for holding securities.

Limitations of Basic Service Demat Account

While a basic service demat account does have its perks, you must note its limitations. 

  • Limited Transaction Limits:

    They have transaction limits, which means that you cannot transact beyond a certain limit. This limit is ₹2 Lakhs. This means that you can’t buy or sell shares worth more than ₹2 Lakhs in a single transaction. 

     

    If you wish to transact beyond this limit, you will have to upgrade to a regular demat account.

 

  • No Margin Facility:

    They do not provide margin facility to investors. This means that you cannot use your demat account holdings as collateral to buy more shares.

A basic service demat account is a simple and cost-effective way for small investors to hold securities in electronic form. It offers limited services compared to a regular demat account. 

 

But it is ideal for investors who do not wish to invest large sums of money in the stock market. 

 

Investors should carefully read the terms and conditions of a basic service demat account before opening one to ensure that they fully understand the features and limitations of the account.

FAQs About the Basic Service Demat Account

What is the maximum number of securities that can be held in a basic service demat account?

A basic service demat account can hold up to 15 securities.

Can a basic service demat account be converted to a regular demat account?

Yes, it can be converted to a regular demat account by submitting a request to the depository participant.

What is the difference between a basic service demat account and a regular demat account?

A basic service demat account offers limited services at a lower cost and can hold a limited number of securities. A regular demat account offers a wider range of services and has no limit on the number of securities that can be held.

Is it necessary to have a demat account to invest in the stock market?

Yes, a demat account is necessary to invest in the stock market as it holds the shares and securities in electronic form, making it easier to trade and transfer ownership.

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