Sebi raised the minimum amount required for a basic service demat account on Friday from Rs 2 lakh to Rs 10 lakh to encourage small investors to participate in the securities market.
According to a circular from the Securities and Exchange Board of India (Sebi), the new rules will take effect on September 1.
Small investors will be encouraged to participate in the stock market and their financial inclusion will be ensured by raising the cap on the value of assets kept in the Basic Services Demat Account (BSDA).
A more simple kind of a standard demat account is called a basic service demat account, or BSDA. Markets regulator Sebi launched the facility in 2012 to help investors with small portfolios bear the cost of demat fees.
In terms of BSDA eligibility, Sebi stated that an individual is eligible if he or she meets certain criteria, such as having only one Demat account as the sole or first holder, having only one BSDA in his name across all depositories, and the value of securities in the account at any time not exceeding Rs 10 lakh for both debt and non-debt securities combined.
Before this, a person could be qualified for BSDA and hold debt securities and non-debt assets in a single demat account valued at up to Rs 2 lakh each.
Sebi stated that the yearly maintenance charge for a BDSA will be zero for portfolio values up to Rs 4 lakh, and Rs 100 for portfolio values greater than Rs 4 lakh but less than Rs 10 lakh.
However, if the portfolio value surpasses Rs 10 lakh, the BDSA would be immediately transformed into a conventional demat account.
Regarding BDSA services, the regulator stated that electronic statements would be issued free of charge to such account holders; however, physical statements could be charged Rs 25 for each statement.
According to the circular, Depository Participants (DPs) will only open BSDAs for eligible accounts unless the account user requests a standard demat account by email.
If an eligible demat account already exists, DPs are required to review it and convert it to BSDA within two months, unless the account holder chooses to maintain their conventional demat account via email. Every billing cycle will conclude with a continuation of this review.
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Sebi released a consultation paper on raising the BSDA threshold limit earlier this month.
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