Basic Service Demat Account – Benefits & Drawbacks

In this article, we will understand what is Basic Service Demat Account (BSDA), what are its benefits, how it is different from regular demat account and how you can open it.

What is a Basic Service Demat Account?

A Basic Service Demat Account, is a different type of Demat account that caters to the needs of beginners and small investors with limited trading volumes.

Normally, regular demat account comes with higher cost associated with it which is normally harsh on small investors.

In 2012, SEBI introduced this special type of demat account meant for small investors. Investors who hold the shares of less than 2 Lakh rupees in their portfolio are reffered to as small investors. It was introduced with the intention of encouraging small and new investors to participate in the securities market.

This account offers a wide range of services that will help investors enter the stock market conveniently, without incurring the significant costs associated with a regular Demat account.

Also Read : How to Freeze and Unfreeze your demat account?

Difference between BSDA and Regular Demat account

A Basic Services Demat Account and a Regular Demat account (Read : Best demat account reviews) are both utilized to store securities electronically. However, there are some notable distinctions between the two types of accounts:

Minimum Balance Requirements: BSDA accounts cater to small-scale investors who prefer not to maintain an excessive amount of securities. Therefore, these accounts have a lower minimum balance requirement as compared to regular Demat accounts.

Fees: The fees charged for maintaining a BSDA account are significantly lower than those of a regular Demat account. There is no annual maintenance charge (AMC) for holding securities up to a certain limit in BSDA accounts, while regular Demat accounts may impose higher AMC fees.

Range of Services: BSDA accounts are better suited for investors who hold a limited number of securities, whereas regular Demat accounts are more suitable for those who frequently trade in the stock market and possess a large number of securities.

Holding Limit: BSDA accounts have a restricted securities holding limit (currently set at Rs. 2 lakhs), beyond which the account will be converted into a standard Demat account.

Additional Features: A standard Demat account may offer supplementary features like online trading, portfolio tracking, and investment research tools, whereas a BSDA account may have limited functionality.

Benefits of a Basic Service Demat Account

Before going through the benefits, it is important to know what happens if your holding value exceeds 2 Lakh rupees. In this case, the BSDA is automatically converted to regular demat account and you will be charged as per it.

If the value goes down again less than Rs 2 lakh, you need to contact the broker and submit the application to convert back to BSDA account, which will be done at next billing cycle of AMC charge deduction.

Now, Investors can reap numerous advantages by opting for the BSDA Account. Compared to a full-service Demat account, it offers lower costs, which translates to significant savings.

The account opening fee, annual maintenance charge, and other fees associated with a full-service Demat account can all be avoided, reducing the financial burden on investors. You check the details of the AMC charges stipulated by MAC for BSDA accounts here.

Below we have listed down the major advantages Basic Service Demat Account offers,

• Cost-Effective: BSDA eliminates maintenance charges for holdings below ₹50,000 and incurs a nominal ₹100 AMC for portfolios up to ₹2,00,000.

• Financial Inclusion: It promotes inclusivity, offering an accessible platform for small investors to learn and participate in the stock market.

• Transparency: Quarterly transaction and annual holding statements provide clear insights into account activities.

• Flexibility: BSDA allows flexibility in statement formats, providing options for physical or electronic statements.

• Convenient Trading: User-friendly features include SMS updates, two delivery instruction slips, and a streamlined process.

• Affordable Learning: BSDA is an affordable and conducive option for small-scale investors to explore and grow their investments.

Limitations of Basic Service Demat Account:

BSDA demat account comes with certain drawbacks.

Firstly, if your holding value exceeds 2 Lakh rupees, the BSDA is automatically converted to regular demat account and you will be charged as per it.

For example, assume that if you invested Rs 1.8Lakhs in BSDA demat account and because of bull market, if the portfolio value becomes Rs2.1 Lakh.

In this case, your BSDA account is automatically converted into regular demat account.

If the value goes down again less than Rs 2 lakh bacause of market correction, you need to contact the broker and submit the application to convert back to BSDA account, which will be done at next billing cycle of AMC charge deduction.

Eligibility criteria for opening a Basic Service Demat Account

Below are the criterias one must satisfy to become eligible for opening a BSDA account,

• Sole Ownership: To qualify for a BSDA, the investor must be the sole holder of the account. Joint ownership is not allowed, ensuring clarity in account management.

• One Account Limit: An individual can have only one BSDA. This restriction encourages investors to maintain a single Demat account across all Depository Participants (DPs), streamlining the process and minimizing complexities.

• First-Time Demat Account Holder: BSDA is typically designed for individuals who are first-time Demat account holders. This criterion aims to cater to new investors who may have smaller portfolios and are still in the learning phase of their investment journey.

• Portfolio Value Limit: The BSDA has a cap on the total value of securities it can hold, set at ₹2,00,000. This ensures that the account is well-suited for small investors with limited capital.

• Joint Account Limitation: If an investor is part of a joint Demat account, they must not be the primary account holder for the BSDA. This reinforces the requirement for the BSDA to be the individual’s primary and sole Demat account.

Residing in India and holding a valid PAN card are mandatory requirements for individual or Hindu Undivided Family (HUF) applicants. In the case of joint applicants, all holders must meet these conditions and possess a valid PAN card.

For minors, an BSDA account can be opened in their name, but guardians must operate the account until they reach 18 years of age.

Documents required for opening a Basic Service Demat Account

To open a Basic Service Demat Account (BSDA), you typically need to provide the following documents:

1. Proof of Identity (PoI)(Any one of the below):
   • Aadhar Card
   • Passport
   • Voter ID
   • Driver’s License
2. Proof of Address (PoA) (Any one of the below):
   • Aadhar Card
   • Passport
   • Voter ID
   • Driver’s License
   • Utility bills (electricity, water, gas) or bank statements with your address
3. PAN Card (Permanent Account Number):
   • This is mandatory for opening any Demat account, including BSDA.
4. Passport Size Photographs:
   • Usually, a couple of recent passport-size photographs are required. ( For Online account opening, the broker usually utlises your photo from Aadhaar database, hence not rerquired)
5. Cancelled Cheque or Bank Passbook Copy:
   • To link your bank account with the Demat account for seamless transactions.
6. Income Proof:
   • While not always mandatory for BSDA, some institutions may request income proof such as salary slips or Income Tax Returns.

How to Open a Basic Service Demat Account

The process of opening a Basic Service Demat Account is easy and convenient, offering investors the flexibility to do so either online or offline, by submitting the required documents. .

Investors can open a Basic Service Demat Account by following these steps:

Online Account Opening Process of BSDA:

To open BSDA account Online- below are the steps that needs to be followed:

1. Choose a Depository Participant (DP):
   • Select the stock broker with whom you want to open the BSDA Demat account like Zerodha or Upstox
2. Visit the DP’s Website:
   • Access the official website of the chosen Stock broker.
3. Initiate the Account Opening Process:
   • Look for options like “Open Demat Account“. Click on the relevant link to start the application process.
4. Fill in the Online Application Form:
   • Complete the online application form with accurate personal details. This may include your name, address, contact information, PAN number, and other necessary information.
5. Upload Required Documents:
   • Scan and upload the required documents, including proof of identity, proof of address, PAN card, passport-size photographs, cancelled cheque or bank passbook copy, and any other documents specified by the DP.
6. Complete In-Person Verification (IPV):
   • Some platforms may require an In-Person Verification (IPV). This can be done through a video call or at a physical location.
7. E-Sign the Documents:
   • Many platforms allow e-signatures for document authentication. Follow the instructions to electronically sign the necessary forms.
8. Review and Submit:
   • Review all the entered information and documents before submitting the application.
9. Wait for Approval:
   • Once the application is submitted, the DP will review and process it. You will receive notifications regarding the status of your application.
10. Receive Your Demat Account Details:
    • Upon approval, you will receive your BSDA details, including the Demat account number.
11. Start Trading or Investing:
    • Once your BSDA is active, you can start trading or investing in the stock market.

Offline Account Opening Process of BSDA:

Offline opening of BSDA account is lengthy process compared to Online method. It is also prone to delay and errors due to human intervention.

But if you prefer to open the BSDA account offline, you should follow below steps,

1. Visit a Depository Participant (stock broker) office who offers Basic Service Demat Account.
2. Fill in the account opening form with the required details.
3. Submit the required documents along with the account opening form.
4. Pay the account opening fee and other charges, if any.
5. The DP will verify the documents and activate the account within a few working days

How to Convert a Regular Demat account Into BSDA Account

In order to convert your Demat account into a Basic Services Demat Account, you will need to followbelow steps atleast 15 days before the next billing cycle of deduction of AMC charges..

Firstly, check make sure you meet eligibility criteria, as the value of your holdings in the Demat account must not exceed or even touch the prescribed limit of Rs. 2 lakh. Failure to meet this requirement will render you ineligible to apply for a BSDA.

Secondly, you will be required to get in touch with your Depository Participant (Stock Broker), the entity responsible for maintaining your Demat account and communicate your intention to convert your account.

Your broker will provide you with all the necessary paperwork and detailed instructions required for the conversion process.

Thirdly, once you have obtained the necessary paperwork, you will be required to submit the new BSDA account opening form, a copy of your Permanent Account Number (PAN) card, and an authentic address proof that is in compliance with the brokers’s policies.

Additionally, your broker may require additional documentation in accordance with their specific policies.

Finally, you will need to wait for your stock broker to process your request, which involves verifying the authenticity of the documents you have submitted.

Upon successful completion of this procedure, your broker will inform you that your Demat account has been converted to a BSDA.

What are the Charges Levied on BSDA?

The charges levied on a Basic Service Demat Account (BSDA) are designed to be more affordable, especially for small investors. Here are the typical charges associated with a BSDA.

Differences Between BDSAs And Regular Demat Accounts:

Below are the main difference between BSDA Vs Regular demat account,

Also Read : Difference between Demat Account and Trading Accont

Final Thoughts

For those with limited money starting in the stock market, a Basic Service Demat Account is a great choice. It’s affordable, easy to open, and experts manage your investments securely.

But, before deciding, consider your specific needs and investment goals.

FAQs about Basic Service Demat Account

Q1: What is a Basic Service Demat Account (BSDA)?

Answer: BSDA, or Basic Service Demat Account, is a simplified version designed by SEBI for small investors. It offers a cost-effective way to participate in the stock market with lower portfolios.

Q2: Who can open a BSDA?

Answer: Individuals with portfolios below ₹2,00,000 are eligible. It’s perfect for new investors or those with smaller investment amounts.

Q3: What is the portfolio limit for a BSDA?

Answer: The BSDA portfolio limit is ₹2,00,000. If it exceeds this, the account may convert to a regular Demat account.

Q4: How are AMCs calculated for a BSDA?

Answer: BSDAs have favorable AMC structures. Zero charges for portfolios up to ₹50,000 and nominal AMC for ₹50,000 to ₹2,00,000, around ₹100 per year.

Q5: Can an existing Demat account be converted to a BSDA?

Answer: Yes, if it meets eligibility criteria and portfolio is within BSDA limit. Conversion conditions may apply.

Q6: Any restrictions on joint accounts with a BSDA?

Answer: BSDAs are for individual accounts; joint accounts are not allowed. The primary account holder in joint accounts must open the BSDA.

Q7: What documents are required to open a BSDA online?

Answer: Typical documents include proof of identity, address, PAN card, photos, cancelled cheque, or bank passbook copy, as specified by the chosen Depository Participant (DP).

Q8: How to check a BSDA statement?

Answer: Investors receive quarterly transaction statements. Electronic statements are often free, and physical statements may have charges after the first two copies.

Q9: Are there charges for electronic transaction statements?

Answer: Electronic transaction statements for BSDA are usually free. Additional charges may apply for physical statements beyond the first two copies.

Q10: What if the portfolio value exceeds ₹2,00,000 in a BSDA?

Answer: If it exceeds ₹2,00,000, the BSDA converts to a regular Demat account with applicable charges for a regular account.

Dont Miss to Read Below Demat Account Informative Articles:

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• How to Convert Shares in Physical Format to Demat Format
• Minimum Amount Required For Opening A Demat Account
• Can a Person Have Multiple Demat Account in India? Is it Legal?
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• How to Open a Joint Demat Account – Benefits
• How To Close Your Demat Account Online?
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• How to freeze and unfreeze your demat account
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