SEBI Raises Value of Securities Eligible for Basic Services Demat Account to Rs 10 Lakh

Mumbai – In a strategic move to promote financial inclusion and attract small investors to the securities market, the Securities and Exchange Board of India (SEBI) has revised the framework for Basic Services Demat Accounts (BSDA). The market regulator announced an increase in the value of securities that can be held in a BSDA from Rs 4 lakh to Rs 10 lakh. The new guidelines will come into effect from September 1, 2024.

Key Changes and Eligibility Criteria

SEBI’s official circular stated that the value of securities held in a demat account must not exceed Rs 10 lakh for both debt and non-debt securities combined at any point in time. To be eligible for a BSDA, an individual must have only one demat account where they are the sole or first holder and should possess only one BSDA across all depositories.

Previously, individuals were allowed to hold debt securities worth up to Rs 2 lakh and other securities worth up to Rs 2 lakh in a single demat account to qualify for a BSDA. This revision significantly raises the threshold, making it more attractive for small investors.

Maintenance Charges and Services

The revised framework also includes changes to the annual maintenance charges (AMC) for BSDA holders. For portfolio values up to Rs 4 lakh, there will be no maintenance charges. For portfolios valued between Rs 4 lakh and Rs 10 lakh, a nominal maintenance charge of Rs 100 will apply. However, if the portfolio value exceeds Rs 10 lakh, the account will automatically be converted into a regular demat account, attracting standard maintenance charges.

SEBI also specified that electronic statements will be provided free of cost to BSDA holders, while physical statements will incur a charge of Rs 25 per statement. This move aims to reduce operational costs for small investors and promote the use of electronic statements.

Boosting Retail Investor Participation

By increasing the threshold for securities in BSDAs, SEBI aims to boost the participation of retail investors in the securities market. The BSDA facility, introduced in 2012, was designed to reduce the burden of demat charges on investors with small portfolios. The latest enhancements are expected to further simplify the investment process and encourage more individuals to open and maintain demat accounts.

SEBI has urged depository participants (DPs) to re-evaluate the eligibility of all account holders within two months from the date of the circular and convert all eligible accounts to BSDAs unless the account holder opts for a regular demat account via email. This review will continue at the end of each billing cycle to ensure compliance with the new rules.

Industry Reactions

The announcement has been well-received by market participants, who see it as a positive step towards greater financial inclusion. By lowering the cost of maintaining demat accounts for small investors, SEBI is helping to democratize access to the securities market.

Conclusion

SEBI’s decision to increase the value of securities eligible for a BSDA to Rs 10 lakh reflects its commitment to enhancing financial inclusion and simplifying the investment process for retail investors. The new guidelines, set to take effect from September 1, 2024, aim to reduce the financial burden on small investors and encourage broader participation in the securities market. This move is expected to foster a more inclusive financial ecosystem, benefiting individual investors and the overall market.