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.
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.
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.
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.
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.
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:
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.
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.
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.
The depository participant verifies the documents submitted by you. Once the documents are verified, you are given a unique demat account number (DP ID).
Once the demat account is activated, you can start using the account for holding securities.
While a basic service demat account does have its perks, you must note its limitations.
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.
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.
A basic service demat account can hold up to 15 securities.
Yes, it can be converted to a regular demat account by submitting a request to the depository participant.
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.
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.