The basics of Basic Demat Account
Makes stock market outing cost-effective for small investors
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A buoyant stock market and the Securities and Exchange Board of India’s (SEBI) investor-friendly measures have lured a large number of retail investors to the Dalal Street over the past few years. As on January 20, 2025, the number of investors registered with the National Stock Exchange (NSE) crossed 11 crore, up from 9.2 crore in March 2024. The number of Demat accounts registered with multiple trading members reached 21 crore in February this year.
Today, nearly 14 per cent of Indians hold a Demat account. As of October 2024, North India led the country, followed by West, South and East. The number of active investors on NSE has surged 44 per cent to nearly 5 crore. Maharashtra has the highest number of Demat accounts, followed by UP and Gujarat.
A Demat account, also known as a dematerialised account, is essentially a digital vault for your securities. It holds shares, bonds, mutual funds and other financial instruments in an electronic format. If you are a retail investor venturing into the stock market, then opening a Demat account would be the first step. For a number of people, however, maintaining this account can be a costly affair, especially if the portfolio is not extensive. The remedy is considering opening a Basic Service Demat Account (BSDA). This account is designed to give “fresh” investors a pocket-friendly access to stock market investments.
Genesis of the basic service account
The BSDA was introduced by the SEBI in 2012 to encourage retail investors to enter the stock market. A key change came into effect a few months back when according to a SEBI circular, from September 1, 2024, onwards, a Demat account with holdings of less than Rs 1 crore would automatically be classified as a BSDA. The same applies to accounts wherein only one Demat account is registered under one PAN number.
How is it different
There’s not much difference as the BSDA provides similar benefits to regular Demat accounts. The difference, however, is in the maintenance charges. In a BSDA, Account Maintenance Charges (AMC) are calculated as per the holding value and are charged on a quarterly basis.
Eligibility for opening this account
- You must be a first-time Demat account holder.
- You must open the account as a sole/primary
applicant.
- The gross value (Principal Profit) of the BSDA shares must not exceed Rs 2 lakh in a financial year (for accounts opened before September 1, 2024).
- If you have another joint Demat account, then you must not be the primary account holder.
How much AMC to be paid
In case you opened a BSDA before August 31, 2024, and your highest holding was Rs 1,75,000, you will have to pay Rs 25 plus 18 per cent GST in the first quarter. In case the account was opened after September 1, 2024, with a holding of Rs 4,75,000, the AMC would also be Rs 25 plus 18 per cent GST for one quarter.
Benefits
- The account maintenance charges are less.
- The fee for hard copy statements mailed to the client is also less.
- The dematerialisation fee is terminated.
Safeguarding Your Demat Account
Safeguarding your Demat account from fraud is important. It saves you from losing money and personal information.
According to Ravi Sharma, branch head, SBI Securities, Chandigarh, Demat is an important component of electronic shareholding, and one needs to secure the Demat account. “Adopting strong password practices, enabling two-factor authentication, and regularly monitoring the accounts significantly reduce the chances of unauthorised access,” says Sharma. Be watchful and alert, and report anything unusual seen while using your account to prevent fraud.
SECURE WAY TO TRADE
- A Demat account offers a convenient way to hold and trade shares electronically, eliminating the hassles of physical certificates, and also simplifying transactions and offering faster settlements.
- Demat accounts can be classified into three types: the Regular Demat Account intended for Indian residents; the Repatriable Demat Account, which allows NRIs to transfer funds abroad; the Non-Repatriable Demat Account, which does not offer repatriation benefits to NRIs.
— The writer is a retired senior banker
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