Everything You Need to Know About the BSDA Account

There are several fees associated with Demat accounts. Costs for credits to the Demat account and costs for account opening have previously been prohibited by SEBI. However, there are additional fees like annual maintenance charges (AMC) and folio charges that are not explicitly stated in a Demat account.

However, small investors can use a BSDA account if they do not want to pay these hefty costs. This blog analyses the concept of the BSDA meaning, its benefits, and the eligibility criteria to open it.

What is a BSDA Account?

The BSDA full form stands for Basic Service Demat Account, which was launched by the Securities and Exchange Board of India (SEBI) on August 27, 2012. BSDA account caters to the small inventors who do not actively trade in the market. The objective of this account is to lessen the Demat fee burden on investors with modest holdings under INR 2 lakh.

In essence, BSDA saves the Demat account holder from two significant expenses. First, depending on the holdings slab the holder is in on the deadline, the AMC is cancelled. Second, holders of BSDA accounts are only eligible to get statements online and are not eligible to obtain paper statements. For BSDA accounts, additional fees such as Demat request form (DRF) charges and per folio on debits will still be applicable.

How to Convert a Full-Service Demat Account to a BSDA Account?

You can convert your full-service Demat account into a BSDA account, but under certain conditions. The authority to check with depositories belongs to the regulator. The depository will use its authority to change the Demat account to a BSDA if appropriate. After that, the regulator will convert your account to a BSDA account.

Your basic service Demat account will be changed to a non-BSDA account if your holding value exceeds the threshold or if you currently have an active Demat Account with another broker.

Benefits of Using a Basic Service Demat Account

Using a BSDA account allows you to avail numerous benefits. Below are some of the common benefits of using this account:

1. Lower AMC

   As per the SEBI guidelines, if your BSDA account holdings are worth less than INR 4 lakh, you do not have to pay any AMC. Even if your portfolio is worth a maximum of INR 10 lakh, you have to pay INR 100.

2. Convenience

   Managing hard copies of your share certificates is no longer an issue with a BSDA account. This makes it more straightforward for you to acquire, sell, and transfer your assets.

3. Conversion to a Regular Demat account

   If the worth of your holdings exceeds INR 10 lakh, your BSDA will be automatically converted to a regular Demat account along with some standard charges.

4. Additional Services

   BSDA holders may also avail additional services like account maintenance, electronic statements, and transactions, that are similar to a regular Demat account.

What are the Eligibility Criteria to Open A BSDA?

You have to meet some eligibility criteria to open a BSDA account, which are detailed below:

• You must be the Demat account’s only holder.
• The value of your securities in your regular Demat account does not exceed INR 2 lakh at any moment.
• You must have only one Demat account across all DPs.
• You cannot open BSDA accounts jointly. If you convert your regular Demat account to BSDA, you should go through the SEBI verification.

What are the Limitations of Using a BSDA Account?

Although BSDA has numerous benefits, it also includes some limitations. Below are the limitations of using a BSDA account:

1. Transaction Limit

   There is a cap on how many transactions you can make in a given year. Overcoming this cap results in additional fees, which may affect your total profitability.

2. Lack of Advanced Features

   Unlike full-service accounts, A BSDA does not offer valuable services like a full-service Demat account does. You cannot avail services like margin trading or loans against securities.

3. Single Account Limitation

   Since there are restrictions on opening dual BSDA accounts, you must be the only account holder.

4. Account Type Restrictions

   If you are considering joint ownership and collaborative investing methods for diversification, this limitation may discourage you.

The Difference Between a Regular Demat Account and a BSDA Account

For converting a regular Demat account to BSDA, it is essential to know the difference between them. A BSDA is a simplified version of a Demat account with no AMC if the holding value is below INR 4 lakh. Non-BSDA accounts or regular Demat accounts, on the other hand, charge annual fees regardless of the holding value. This makes BSDA more cost-effective for small investors.

Final Thoughts

A BSDA account comes with a simple and inexpensive method of electronically keeping and maintaining a small number of securities. You can benefit from your BSDA account’s lower fees, simple eligibility criteria, and easy maintenance.

However, if you do not have a regular Demat account, download the PL Capital Group – Prabhudas Lilladher application to open one. PL Capital does not charge any fees to open a Demat account. In addition, it levies zero AMC for trading.

Frequently Asked Questions

1. Does the value of securities held in a BSDA have a limit?

Yes, the value of your security holdings in BSDA must remain below INR 10 lakh.

2. Is it possible for one investor to have several BSDAs?

No, an investor cannot have several BSDAs. He or she must be the sole holder of a BSDA.

3. What happens if a BSDA’s holdings exceed the permitted threshold?

If the value of your BSDA holdings exceeds the threshold limit, your BSDA account will be immediately converted into a regular Demat account.

4. Does BSDA have any transaction charges?

Yes, you have to pay basic transaction charges for each transaction you make through your BSDA.